Judge Kerry Bensinger, Case Number: 24STCV05772, Date: 2024-08-15 Tentative Ruling

Counsel may submit on the tentative ruling by emailing Dept. 31 before 8:30 the morning of the hearing. The email address is smcdept31@lacourt.org. Please do not call the court to submit on the tentative. Please do not submit to the tentative ruling on behalf of the opposing party. Please do not e-mail the Court if you plan to appear and argue.

In deciding whether to submit on the tentative ruling or attend the hearing and present oral argument, please keep the following in mind:

The tentative rulings authored by this court reflect that the court has read and considered all pleadings and evidence timely submitted to the court in connection with the motion, opposition, and reply (if any). Because the pleadings were filed, they are part of the public record.

Oral argument is not an opportunity to simply regurgitate that which a party set forth in its pleadings. Nor, is oral argument an opportunity to "make a record" when there is no court reporter present and the statements and arguments of counsel are already part of the record because they were set forth in the pleadings. Finally, simply because a party or attorney disagrees with the court's analysis and ruling or is not satisfied with it does not necessarily warrant oral argument when no new arguments will be articulated.

If you submit on the tentative, you must immediately notify all other parties email that you will not appear at the hearing. If you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the motions. If all parties to the motion submit, this tentative ruling will become the final ruling after the hearing date and it will be memorialized in a minute order. This tentative ruling is not an invitation, nor an opportunity, to file further documents relative to the hearing in question. No such document will be considered by the Court.

**Tentative rulings on Motions for Summary Judgment will only be available for review in the courtroom on the day of the hearing.

WYNN CAPITAL MANAGEMENT SRL’S MOTION QUASH SERVICE OF SUMMONS AND COMPLAINT AND TO DISMISS FOR LACK OF PERSONAL JURISDICTION

This action arises from a dispute between business partners. Plaintiff Howard Scott Jordan II (Jordan) has extensive knowledge in intellectual property, coding, and marketing. In November 2022, Defendant Irina Ioana Ciochiu (Irina) engaged Jordan to work with her and Wynn Capital Management SRL (Wynn). Wynn is engaged in the business of making claims on airport consumers’ behalf in connection with flight delays and other issues stemming from airline travel. Wynn, a Romanian company, is owned by Ion Theodor Ciochiu (Ion).

Based on Irina’s false representations that she owns Wynn’s equity, Jordan and Irina entered into a partnership. Jordan and Irina agreed that, in exchange for Jordan’s contribution to coding and marketing, he would receive a 49% interest in Wynn’s revenues and profits. As a means to carry out the partnership Jordan and Irina created FlightHelp LLC (FlightHelp). During the partnership, Jordan contributed services, purchased software, and helped to develop intellectual property to increase Wynn’s revenue.

The partnership proved fruitful. Consumer claims totaled over $22,000,000 by the end of Summer 2023. Irina embarked on a scheme to sever Jordan from the partnership, which included but was not limited to refusing to pay any of Jordan’s development invoices, salary, or distributions from Wynn’s operations. Further, Irina locked Jordan out of any and all Wynn/FlightHelp-related accounts and depleted FlightHelp’s bank accounts without Jordan’s authorization or consent.

On March 7, 2024, Jordan and FlightHelp (collectively, “Plaintiffs”) filed a Complaint against Defendants Irina, Ion, and Wynn for (1) fraud, (2) breach of fiduciary duty, (3) conversion, (4) breach of partnership agreement, (5) unfair competition, (6) violations of Bus. & Prof. Code § 17200, et seq. (7) partnership dissolution (Corp. Code § 16801), (8) violations of Penal Code § 496, (9) accounting, and (10) breach of contract.

Before the court are two motions: (1) Defendant Irina’s demurrer to the Complaint, and (2) Defendant Wynn Capital Management SRL’s motion to quash service of summons. The court addresses each motion in turn.

On May 13, 2024, Defendant Irina filed this demurrer to the second, third, fourth, fifth, seventh, eighth, and ninth causes of action in the Complaint.

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.)

Plaintiffs’ unopposed request for judicial notice of Wynn’s filings with the California Secretary of State is GRANTED. (Evid. Code, § 452, subd (c).)

“Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person, by telephone, or by video conference 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, subd. (a).) Defense counsel has complied with the meet and confer requirement. (See Declaration of David Newman, ¶ 2.)

The court begins by noting an overarching problem in the Complaint and Plaintiffs’ moving papers: confusion between the “partnership” and FlightHelp. Plaintiffs do not adequately differentiate when the actions or conduct were taken on behalf of the partnership, or FlightHelp, or both. Although Plaintiffs’ pleadings attempt to explain that the partnership preexisted FlightHelp and that FlightHelp was created to carry out the partnership, Plaintiffs at times refer to the partnership and FlightHelp as one in the same, and sometimes as separate entities. Further adding to the confusion is the lack of material terms that comprise the partnership agreement.[1] The Complaint is vague and uncertain. The demurrer is meritorious on this ground alone. Against this background, the court will address the parties remaining arguments.

“The elements of a cause of action for breach of fiduciary duty are the existence of a

fiduciary relationship, its breach, and damage proximately caused by that breach.” (Knox v. Dean (2012) 205 Cal.App.4th 417, 432-33.)

The second cause of action is alleged by Jordan against Irina. Jordan alleges that Irina owed him a fiduciary duty as a partner in the partnership and as a member of FlightHelp. (Complaint, ¶ 63.) Irina breached her duty to Jordan by “failing to comply with the terms of the Partnership and applicable law; mismanaging the Partnership and its assets … engaging in self-dealing by providing themselves with an unauthorized salary and distributions… usurping the Partnership’s business opportunities; paying their personal legal fees, audit fees, and other personal expenses in an unknown amount expected to exceed $75,000.00; excluding Jordan from the Partnership’s activities or assets without justification or excuse; and concealing certain financial and other documents belonging to the Partnership.” (Complaint, ¶ 64.) Jordan is FlightHelp’s managing member with managerial authority to direct its operations. (Complaint, ¶ 6.)

Irina argues the second cause of action fails for two reasons. First, she did not owe a fiduciary duty to Jordan because she was a non-managing member of FlightHelp. Second, the allegations describing the partnership are vague and contradictory.

The court begins with the first argument. Irina cites Corporations Code section 17704.09 for the proposition that a non-managing member does not owe fiduciary duties. Section 17704.09 states:

The fiduciary duties that a member owes to a member-managed limited liability company and the other members of the limited liability company are the duties of loyalty and care under subdivisions (b) and (c).

(b) A member’s duty of loyalty to the limited liability company and the other members is limited to the following:

(1) To account to the limited liability company and hold as trustee for it any property, profit, or benefit derived by the member in the conduct and winding up of the activities of a limited liability company or derived from a use by the member of a limited liability company property, including the appropriation of a limited liability company opportunity.

(2) To refrain from dealing with the limited liability company in the conduct or winding up of the activities of the limited liability company as or on behalf of a person having an interest adverse to the limited liability company.

(3) To refrain from competing with the limited liability company in the conduct or winding up of the activities of the limited liability company.

(c) A member’s duty of care to a limited liability company and 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.

(d) A member shall discharge the duties to a limited liability company and 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.

(e) A member does not violate a duty or obligation under this article or under the operating agreement merely because the member’s conduct furthers the member’s own interest.

(f) In a manager-managed limited liability company, all of the following rules apply:

(1) Subdivisions (a), (b), (c), and (e) apply to the manager or managers and not the members.

(3) Except as otherwise provided, a member does not have any fiduciary duty to the limited liability company or to any other member solely by reason of being a member.

Here, FlightHelp’s Operating Agreement states: “The management of the business shall be conducted by Scott Jordan, who shall serve as the Managing Partner. The Managing Partner shall have the authority to manage, direct, and control the legal business affairs of the business. Irina Ciochiu shall have the right to participate in the management of the business, but shall not have the authority to act on behalf of the business without the consent of the Managing Partner.” (Complaint, Ex. A, p. 1; see Complaint, ¶ 6.) The foregoing establishes that FlightHelp is a manager-managed limited liability company, that Jordan serves as FlightHelp’s Managing Partner, and that Irina is a member of the FlightHelp without managerial authority. Accordingly, pursuant to Corporations Code section 17704.09, subdivision (f)(3), Irina does not owe a fiduciary duty to Jordan as a member of FlightHelp.[2]

The same reasoning applies to Irina’s alleged fiduciary duties as a partner. “A limited partner does not have any fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner.” (Corp. Code, § 15903.05.) Irina argues that the Complaint does not clearly indicate whether Jordan and Irina’s partnership was general or limited but the FlightHelp’s Operating Agreement, as described above, suggests the parties created a limited liability partnership with Irina as the limited partner. Plaintiffs allege, consistent with the Operating Agreement, that Jordan had managing authority and Irina did not. (See Mission W. Properties, L.P. v. Republic Properties Corp. (2011) 197 Cal.App.4th 707, 716 [“In general, the absence of any responsibility for management of partnership business makes it unlikely that a partner will incur a fiduciary duty to the partnership and partners.”].) The parties created a limited liability partnership. Corporations Code section 15903.05 therefore applies and forecloses Jordan’s breach of fiduciary duty claim against Irina as a limited partner of the partnership.

Jordan raises two arguments in opposition: (1) Irina breached her obligations under Corporations Code section 16404; and (2) the partnership as alleged in the Complaint is a general partnership evidence by FlightHelp’s Operating Agreement “the terms of which are governed by a partnership agreement that is in part oral, in part written, in part implied by conduct, and in part implied by law by way of the Corporations Code’s provisions applicable to the Partnership[.]” (Opp., p. 8.) The arguments are unpersuasive.

First, Section 16404 sets forth the general principle that partners owe fiduciary duties of loyalty and care to a partnership and to partners of the partnership. However, as alleged, the parties created a limited partnership with Irina as a limited partner. As such, Section 15903.05 applies. Under Section 15903.05, Irina does not have a fiduciary duty as a limited partner.[3]

Second, Plaintiff’s argument that the partnership agreement is comprised of oral, written, and implied elements is barred by the merger clause in the Operating Agreement. It states, “This Agreement constitutes the entire agreement between the Partners and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.” (Complaint, Ex. A, p. 2.) The court therefore looks only to the Operating Agreement which indicates that Jordan is the managing partner.

Plaintiff cites Shorb v. Beaudry (1880) 56 Cal. 446, 450-51 for the proposition that a corporation that is formed merely to carry out the agreements between partners must be disregarded in favor of the pre-incorporation partnership agreement between the parties. Shorb does not change the result. In Shorb, the parties “associated themselves together for the purpose of uniting in one owner certain lands and water rights, some of which they then owned, and some of which were to be obtained from other parties, for the purpose of developing and selling the same, and dividing the proceeds of the sales between themselves, according to their agreements in writing.” (Shorb, at p. 449.) Accordingly, the California Supreme Court disregarded the act of incorporation and treated the parties in light of their agreements between themselves.

Here, however, Plaintiff’s first and foremost obstacle is the Operating Agreement. As discussed above, the Operating Agreement “supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.” [4]

The elements of a conversion claim are: (1) plaintiff owned/possessed or had the right to possess certain personal property; (2) defendant knowingly or intentionally substantially interfered with plaintiff’s property by (i) taking possession of the property; (ii) preventing plaintiff from access to the property; (iii) destroying the property; or (iv) refusing to return the property after plaintiff demanded its return; (3) plaintiff did not consent; (4) plaintiff was harmed; and (5) defendant’s conduct was a substantial factor in causing plaintiff’s harm. (CACI No. 2100.)

Plaintiffs allege that Jordan, through FlightHelp, had a right to receive 49% of profits from Wynn’s revenues.[5] (Complaint, ¶ 70.) Upon information and belief, Wynn’s profits for 2023 were between $2,000,000 - $20,000,000, yet no distributions were made to Jordan. (Complaint, ¶ 71.) On information and belief, Defendants are currently hoarding at least $2,000,000 of the Funds in a Romanian bank account, and have refused to turn any of this amount over to Jordan or FlightHelp. (Complaint, ¶ 72.)

Irina argues the third cause of action fails for two reasons: (1) there is no specific and identifiable sum of money that has been allegedly converted; and (2) there are no allegations that Irina is the responsible party for the conversion. The court agrees.

“Money may be the subject of conversion if the claim involves a specific, identifiable sum.” (Welco Elecs., Inc. v. Mora (2014) 223 Cal.App.4th 202, 209.) Here, Plaintiffs fail to identify a specific, identifiable sum. Plaintiffs contend that a conversion claim is sufficiently pleaded if it involves money. Plaintiffs misread the law. A conversion claim may involve money only if a specific, identifiable sum is alleged. Plaintiffs’ general allegations of $2,000,000 - $20,000,000 in profits and Defendants “hoarding a least $2,000,000” are insufficient to state a conversion claim. (See, e.g., Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229 [upholding trial court’s grant of summary judgment on plaintiffs’ conversion claims where neither the pleadings nor response proof identified any specific, identifiable sums that were converted but merely alleged that one plaintiff’s allegedly lost approximately $1.4 million and the other plaintiff allegedly lost approximately $120,000].)

Plaintiffs do not respond to Irina’s second argument that the conversion claim against Irina is vague. Plaintiffs therefore concede the demurrer is meritorious on this separate ground.

The elements of a breach of contract cause of action are: (1) the existence of a valid contract between the plaintiff and the defendant, (2) the plaintiff’s performance, (3) the defendant’s unjustified failure to perform, and (4) damages to the plaintiff caused by the defendant’s breach. (CACI No. 303; Careau & Co. v. Security Pacific Business, Inc. (1990) 222 Cal.App.3d 1371, 1388 (Careau); Otworth v. Southern Pac. Transportation (1985) 166 Cal.App.3d 452, 458.) “[T]he complaint must indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth, 166 Cal.App.3d at pp. 458-459.)¿ The elements of a breach of oral contract claim are the same as those for a breach of written contract. (Careau, 222 Cal.App.3d at p. 1388.)¿

Plaintiffs allege that “[t]he Partnership is a valid, binding contract between Irina, Ion as Wynn’s owner, and Jordan, to own Wynn’s revenue through the instrumentality of Flighthelp, as evidenced in part by Flighthelp’s Operating Agreement and Articles of Organization.” (Complaint, ¶ 78.) Irina entered into the Partnership in her individual capacity and on Wynn’s behalf as Wynn’s apparent Chief Executive Officer. By receiving the benefits of Jordan’s development efforts and otherwise acting as partners, Wynn and Ion ratified, approved, and/or adopted the terms of Flighthelp’s Operating Agreement and the Partnership, resulting in Jordan now owning 49% of Wynn pursuant to the Partnership.” (Complaint, ¶ 79.) Defendants breached the Partnership Agreement by not distributing 49% of Wynn’s profit for 2023. (Complaint, ¶ 80.)

Irina argues the fourth cause of action fails because the terms of the written agreement are not set out verbatim in the body of the complaint nor is a copy of the written agreement attached and incorporated by reference. In support of this proposition, Irina cites Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.

This argument fails for two reasons. First, there is a split of authority. Harris relies on Otworth v. Southern Pac. Transportation Co. (1995) 166 Cal.App.3d 452, 459. The Fourth District Court of Appeal in Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394 (Miles) disagreed with Otworth, stating:

“The Otworth court did not offer any analysis to support that proposition. Instead, it simply cited Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 59, 35 Cal.Rptr. 652 (Wise) (overruled on other grounds in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510, 521, 28 Cal.Rptr.2d 475, 869 P.2d 454). The Wise court stated, “where a written instrument is the foundation of a cause of action, it may be pleaded in haec verba by attaching a copy as an exhibit and incorporating it by proper reference.” (Wise, at p. 59, 35 Cal.Rptr. 652.) It is readily apparent that the Otworth court read more into that statement than is actually there. The Wise court was simply stating one available method of pleading the contract—it was not specifying the exclusive means of pleading a contract. The correct rule is that “a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199, 126 Cal.Rptr.2d 908, 57 P.3d 372.) Because it is apparent that the Otworth court misread Wise, and because, in any event, we are bound by our Supreme Court, we decline to follow Otworth.

(Miles, at pp. 401-402.) This court is similarly bound by the California Supreme Court and elects to follow Miles.[6]

However, even applying Miles, the court finds that the Complaint does not adequately plead the legal effect of the partnership agreement. As the court stated at the outset of this analysis, Plaintiffs do not sufficiently differentiate between the partnership and FlightHelp. For instance, FlightHelp’s Operational Agreement appears to cover the partnership and FlightHelp’s operations, suggesting they are one in the same. (See Complaint, Ex. A.) If that is so, the Complaint is contradictory. Jordan alleges that he was to contribute his services to the partnership in exchange for a 49% interest in Wynn’s revenues and profits (Complaint, ¶ 27) but the Operating Agreement does set forth that term. The fourth cause of action is uncertain.

The tort of unfair competition is an equitable remedy. In Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 393-94, the Second Appellate District provided the following background:

Although the term “unfair competition” applies to several types of misconduct (Balboa Ins. Co. v. Trans Global Equities (1990) 218 Cal.App.3d 1327, 1341–1343, 267 Cal.Rptr. 787), the tort of unfair competition pertinent here is “the act of ‘passing off’ one's goods as those of another.” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1263, 10 Cal.Rptr.2d 538, 833 P.2d 545.) That tort “developed as an equitable remedy against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection.” (Ibid.) Injunctive relief and damages are available for common law unfair competition involving fraud or an intent to mislead consumers. (Modesto Creamery v. Stanislaus Creamery Co. (1914) 168 Cal. 289, 291–292, 142 P. 845 (Modesto Creamery ); see Gordon v. Warner Bros. Pictures, Inc. (1969) 269 Cal.App.2d 31, 39, 74 Cal.Rptr. 499 [injunctive relief and damages available for unfair competition when defendant's conduct is fraudulent]; Wood v. Peffer (1942) 55 Cal.App.2d 116, 125, 130 P.2d 220 [in cases of unfair competition, injunctive relief and accounting of wrongful profits available upon a showing of fraud or intent to divert the plaintiff's business by unlawful means].)

“The purpose of the equitable doctrine is to prevent unfair competition through misleading or deceptive use of a term exclusively identified with the claimant's product and business [citation], affording judicial protection whenever ‘the name and the business [through continued association] become synonymous in the public mind; and submerges the primary meaning of the name ... in favor of its meaning as a word identifying that business.’ [Citation.] The crucial element is the mental association in the buyer's mind between the mark used in connection with the product and a single source of origin.” (North Carolina Dairy Foundation, Inc. v. Foremost–Mckesson, Inc. (1979) 92 Cal.App.3d 98, 108, 154 Cal.Rptr. 794 (North Carolina Dairy Foundation ), quoting Visser v. Macres (1963) 214 Cal.App.2d 249, 253, 29 Cal.Rptr. 367.)

Here, Plaintiffs allege that the Defendants engaged in “misappropriation of the Partnership’s property, including, without limitation, Flighthelp’s intellectual property, confidential information, and trade secrets.” (Complaint, ¶ 85.)

Irina argues the fifth cause of action fails because there are no allegations that Irina is “passing off” goods under another brand or mark that would cause confusion in consumers. The court agrees with this observation. The Complaint does not contain allegations demonstrating deceptive or misleading practices that could constitute a cause of action for common law unfair competition. Plaintiffs’ opposition only highlights this deficiency by referring the court to a concurrently filed declaration. The court disregards Plaintiffs’ reference to extrinsic matters.

A partnership may be dissolved where it is not reasonably practicable to carry on its business due to one partner freezing another out of the business. (See Corp. Code § 16801(5) (“On application by a partner [a partnership may be dissolved by] judicial determination that … [t]he economic purpose of the partnership is likely to be unreasonably frustrated [or where a] partner has engaged in conduct relating to the partnership business that makes it not reasonably practicable to carry on the business[.]”)

Jordan seeks dissolution of the alleged partnership with Irina. (See Complaint, ¶ 94.) Jordan alleges that he and Irina are partners in the Partnership, which owns Wynn. (Complaint, ¶ 92.) Grounds for dissolution and winding up of the Partnership now exist, including that: (1) the economic purpose of the Partnership of owning Wynn and its revenue has become and now is unreasonably frustrated by way of Defendants’ unlawful conduct alleged in this Complaint; (2) Irina has engaged in conduct relating to the Partnership’s business making it not reasonably practicable to carry on the business of the Partnership with Irina as a partner; and (3) it is not otherwise reasonably practicable to carry on the Partnership’s business in conformity with the Partnership Agreement given Defendants’ unlawful conduct. (Complaint, ¶ 93.) Therefore, Jordan requests a judicial determination that the Partnership be dissolved and wound up, and an order that the proceeds of the winding up of its assets, including Wynn, be distributed to Jordan in accordance with his partnership interest in the Partnership.

Irina argues that the allegations supporting the seventh cause of action are contradictory. Specifically, FlightHelp’s Articles of Incorporation, which are attached as Exhibit B to the Complaint, indicate that FlightHelp is the sole owner of Wyn. (See Complaint, Ex. B.) The court agrees. This exhibit is at odds with the allegation that the partnership owns Wynn. Jordan therefore cannot accomplish distribution of the Wynn’s revenue by dissolving the partnership.

“Section 496, subdivision (a) (section 496(a)) defines the criminal offense of what is commonly referred to as receiving stolen property. As amended in 1972 (Stats. 1972, ch. 963, § 1, p. 1739), it provides in relevant part: ‘Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained,” is subject to incarceration.” (Siry Inv., L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 346.)

In Switzer v. Wood (2019) 35 Cal.App.5th 116, the Court of Appeal discussed the crimes constituting theft, stating in relevant part:

A violation of section 496(a) may, by its own terms, relate to property that has been “stolen” or “that has been obtained in any manner constituting theft or extortion.” (§ 496(a), italics added.) As reflected in Bell v. Feibush, supra, 212 Cal.App.4th at p. 1048, 151 Cal.Rptr.3d 546, the issue of whether a wrongdoer's conduct in any manner constituted a “theft” is elucidated by other provisions of the Penal Code defining theft, such as Penal Code section 484. In 1927, the Legislature consolidated the crimes of larceny, embezzlement, and theft by false pretense in Penal Code section 484, subdivision (a), under the single term “theft.” (Bell v. Feibush, at p. 1048, 151 Cal.Rptr.3d 546; see also People v. Vidana (2016) 1 Cal.5th 632, 640–641, 206 Cal.Rptr.3d 556, 377 P.3d 805 [although the distinctive substantive elements of each offense remained the same, each constituted the crime of “theft”]; People v. Gomez (2008) 43 Cal.4th 249, 255, fn. 4, 74 Cal.Rptr.3d 123, 179 P.3d 917.) Section 484, subdivision (a), states as follows: “Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his or her wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft.” (Italics in original.)

“Section 496(c), similar to some provisions in other statutory schemes, articulates a right to special civil remedies when a violation of section 496(a) has occurred. Subdivision (c), as also amended in 1972, states that any person who has been injured by a violation of section 496(a) ‘may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees.’” (Siry Inv., L.P., 13 Cal.5th at. pp. 346-47, footnotes omitted.) A criminal conviction is not a prerequisite to recovery of treble damages. (Switzer, supra, 35 Cal.App.5th at p. 126.)

As alleged in the Complaint, Defendants committed theft in violation of Penal Code section 496(a) by acts of fraud, breach of fiduciary duty, and conversion, including fraudulently diverting or withholding the Funds for their personal benefit despite Plaintiffs’ entitlement to them. (Complaint, ¶ 99.)

Irina argues the eighth cause of action fails because there is no allegation showing that the property in question already had the character of having been stolen when it came into defendant’s possession. For this proposition, Irina cites Lacagnina v. Comprehend Sys., Inc. (2018) 25 Cal.App5th 955, 971. Lacagnina, however, is not controlling. As the California Supreme Court observed in Siry Inv., L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, the proposition elucidated in Lacagnina was dictum within dictum and based upon an erroneous reading of the statute.[7]

Nonetheless, the court finds that the eighth cause of action is deficiently pleaded. Plaintiffs again point to facts that appear in a concurrently filed declaration. Those facts are not alleged in the Complaint. Indeed, Plaintiffs do not point to any specific allegations that support a cause of action based on violation of Penal Code section 496(c).

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. The action carries with it an inherent limitation; an accounting action is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation. (Sass v. Cohen (2020) 10 Cal. 5th 861, 869 [cleaned up].) “The right to an accounting will often arise where the defendant has abused a special relationship with the plaintiff, such as in cases involving trusts, partnerships and domestic relations, or fiduciary relationships.” (Meister v. Mensinger (2014) 230 Cal.App.4th 381, 403-404 (Meister).)

Plaintiffs allege they are entitled to an accounting from Defendants as to all financial transactions, corporate actions, and all other corporate documents related to the Partnership, Flighthelp, and/or Wynn. (Complaint, ¶ 104.) Because Jordan is a partner in the Partnership, managing member of Flighthelp and its Chief Technical Officer, and an interest holder of Wynn’s revenues, Defendants were and are fiduciaries to Jordan, in their roles as partners, members, and/or interest holders in the Partnership, Flighthelp, and/or Wynn, and, accordingly, were and are in a legal relationship with Plaintiffs sufficient to impose equitable accounting obligations on Defendants. (Complaint, ¶ 105.) Defendants, as a result of their unlawful conduct described above, owe some balance to Plaintiffs that can only be ascertained by an accounting. Plaintiffs hereby demand an accounting from November 2022 to the present in connection with the Partnership, Wynn, and all other issues described in this Complaint, including, without limitation, a list of all of Wynn’s accounts receivable and the status of receipt of the account, when the account is expected to be received, and to which bank the funds at issue are to be transferred. Further, Plaintiffs demand the imposition of a constructive trust on motion over all of Wynn’s assets to aid in the accounting, and such is necessary given Defendants’ active dissipation of Wynn’s assets as alleged above. (Complaint, ¶ 106.)

Irina argues that the ninth cause of action fails because there are no allegations showing that the nature of the accounts is so complicated that an accounting is necessary. The court disagrees. As the Court of Appeal stated in Meister, supra, a case which Irina selectively cites, the right to an accounting will often arise in cases involving partnerships. The present case involves a partnership and at least two business entities. This cause of action does not fail for a lack of complexity.[8]

Instead, the court finds that the ninth cause of action fails for the reason initially noted by the court: uncertainty. It is not clear from the allegations whether the parties created a general or limited partnership. As the court has noted, the allegations and Operating Agreement support the creation of a limited partnership. If so, then it is unclear why Jordan, as the managing partner, cannot conduct the accounting.

Leave to amend is GRANTED. Plaintiffs are to serve and file the First Amended Complaint within 30 days of this order.

Plaintiffs filed this action on March 7, 2024. The Complaint alleges that Jordan is a resident of North Carolina and that FlightHelp is a Wyoming limited liability company with its principal place of business in North Carolina. Wynn is a Romanian company doing business internationally, nationally, and in the County of Los Angeles, California. Irina is resident of Los Angeles, California. Ion is a resident of Romania who has visited California in connection with Wynn’s operations.

Plaintiffs filed a Proof of Service of Summons indicating that Wynn was served by serving Irina, Wynn’s agent for service, by substituted service on April 1, 2024.

On April 5, 2024, Wynn formed a subsidiary which is similarly named Wynn Capital Management (Wynn2). Rina is designated as the agent for service of process.

On May 13, 2024, Wynn filed this motion to quash service of summons and complaint and to dismiss for lack of personal jurisdiction.

A defendant may move to quash service of summons on the ground of lack of jurisdiction of the court over him or her.¿ (Code Civ. Proc., § 418.10, subd. (a)(1).)¿ The court may dismiss without prejudice the complaint in whole, or as to that defendant, when dismissal is made pursuant to Section 418.10.¿ (Code Civ. Proc., § 581, subd. (h).)¿¿¿

“A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.”¿ (Code Civ. Proc., § 410.10.)¿ “The Due Process Clause protects an individual’s liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.’” (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 471-472.)¿ A state court may not exercise personal jurisdiction over a party under circumstances that would offend “traditional notions of fair play and substantial justice.”¿ (Asahi Metal Industry Co., Ltd., v. Superior Court of California, Solano County (1987) 480 U.S. 102, 113.)¿¿¿

When a defendant moves to quash service of process on jurisdictional grounds, the plaintiff has the initial burden of demonstrating facts justifying the exercise of jurisdiction. (Jayone Foods, Inc. v. Aekyung Industrial Co. Ltd. (2019) 31 Cal.App.5th 543, 553 (Jayone Foods).)¿ Once facts showing minimum contacts with the forum state are established, the defendant has the burden to demonstrate that the exercise of jurisdiction would be unreasonable.¿ (Ibid.)¿ “The plaintiff must provide specific evidentiary facts, through affidavits and other authenticated documents, sufficient to allow the court to independently conclude whether jurisdiction is appropriate. [Citation.]¿ The plaintiff cannot rely on allegations in an unverified complaint or vague and conclusory assertions of ultimate facts.¿ [Citation.]”¿ (Strasner v. Touchstone Wireless Repair & Logistics, LP (2016) 5 Cal.App.5th 215, 222.)¿

Plaintiffs request judicial notice of two documents filed with the California Secretary of State. The court granted this request in connection with Plaintiffs’ opposition to the demurrer.

Plaintiffs assert four objections to the Declaration of Irina Ioana Ciochiu and seven objections to portions of the Declaration of Ion Theodor Ciochiu.

Objection No. 4 targets Paragraph 5 of the Irina Declaration. Paragraph 5 states, in full:

“In light of Jordan’s destructive conduct, and after Plaintiffs filed the lawsuit, it became clear to me that I needed to break from Plaintiffs’ self-dealing and fraud, and to try to find a way to continue normal business operations without interference from Plaintiffs. As a result, on April 5, 2024, I helped to create a subsidiary for Wynn (also called Wynn Capital Management, but for ease of reference it will be called Wynn2) and registered it as an out-of-state corporation with the California Secretary of State. As required by California, Wynn2 has a California business address. I am the designated agent for service of process. To date, Wynn2 has conducted no business in California. It is merely a corporation that exists on paper should the need arise to use it, pending the outcome of this lawsuit. Wynn has never acted through Wynn2 for any purpose related to this lawsuit, or in reality, for any purpose whatsoever.”

Objection No. 4 is SUSTAINED as to the first sentence of Paragraph 5. The objectionable material is argumentative. As to the remainder of Paragraph 5, Objection No. 4 is OVERRULED.

The court does not rely on the other objected-to material in disposing of Wynn’s motion and therefore declines to rule on those objections.

Wynn argues that Plaintiffs cannot establish general or specific jurisdiction over Wynn. The court addresses each issue in turn.

A defendant is subject to a state’s general jurisdiction if its contacts “are so continuance and systematic as to render [it] essentially at home in the forum State.”¿ (Daimler AG v. Bauman (2014) 571 U.S. 117, 127.)¿ A court may exercise general jurisdiction over an out-of-state corporation only in “exceptional cases.” (See Daimler AG, 571 U.S. at p. 139, fn. 19 [“We do not foreclose the possibility that in an exceptional case, see, e.g., Perkins, described supra, at 755 – 757, and n. 8, a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State. But this case presents no occasion to explore that question, because Daimler's activities in California plainly do not approach that level. It is one thing to hold a corporation answerable for operations in the forum State, see infra, at 763, quite another to expose it to suit on claims having no connection whatever to the forum State.”].) The acts of corporate agents within the forum may establish jurisdiction over the corporation, however “the designation of an agent for service of process and qualification to do business in California alone are insufficient to permit general jurisdiction except for lawsuits arising out of the foreign corporation’s business conducted in the state.” (DVI, Inc. v. Superior Ct. (2002) 104 Cal.App.4th 1080, 1095 (DVI).)

Plaintiffs have the initial burden to show there are facts justifying the exercise of jurisdiction over Wynn. (See Jayone Foods, supra, 31 Cal.App.5th at p. 553.) Plaintiffs argue general jurisdiction exists over Wynn because Wynn’s principal place of business is Irina’s residence in Los Angeles and that she directed Wynn’s affairs out of that residence. In support of those propositions, Plaintiffs submit California Secretary of State filings and direct the court’s attention to portions of the Declaration of Howard Scott Jordan II (Jordan Declaration).

Plaintiffs do not meet their initial burden The California Secretary of State filings do not relate to Wynn. (See Request for Judicial Notice (RJN) 1 and 2.) Rather, they relate to Wynn2, the entity created by Wynn after this lawsuit was filed, and establish only Irina’s address is the principal place of business for Wynn2. (See Irina Decl., ¶ 5.) Jordan’s declaration does not further his argument. Only one of the cited paragraphs mention Los Angeles. (See Jordan Decl., ¶ 50.) None of the paragraphs demonstrate that Irina directed Wynn’s affairs from her Los Angeles residence. Plaintiffs do not meet their burden to show Wynn is “at home” in California.[9]

“A court may exercise specific jurisdiction over a nonresident defendant only if: (1) if the defendant has purposefully availed himself or herself of forum benefits; (2) the controversy is related to or arises out of the defendant’s contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 269 (cleaned up).) This test does not require a “causal relationship between the defendant’s in-state activity and the litigation.”¿ (Ford Motor Co. v. Montana Eighth Judicial District Court (2021) 592 U.S. 351, 362.)¿ The “arise out” of standard “asks about causation,” but “relate to” does not. (Ibid.) “When a corporation has continuously and deliberately exploited a State’s market, it must reasonably anticipate being haled into that State’s courts to defend actions based on products causing injury there.” ¿(Id. at p. 364 (cleaned up).)¿

Plaintiffs argue that Wynn purposefully directed conduct toward California when Irina, acting as Wynn’s CEO, instructed Jordan to code flighthelp.eu to target California, its airports, and its residents in those airports. Further, Irina conducted business on behalf of Wynn with a California resident, Ms. Jinny Oh, by engaging in calls with Ms. Oh and later entering into a contract with her. (See Jordan Decl., ¶¶ 8-10, 101-103, 120, 149, Exs. 94-96.)

Plaintiffs do not meet their initial burden. “ ‘Minimum contacts’ analysis looks to the defendant's contacts with the forum State itself, not the defendant's contacts with persons who reside there.” (Walden v. Fiore (2014) 571 U.S. 277, 285.) Plaintiffs’ evidence demonstrates that Wynn had contact with a person (Ms. Oh) who resides in California. That is insufficient.

Plaintiffs’ evidence showing Irina directing Jordan to code flighthelp.eu to “target” California does not change the result. A closer look at the Jordan Declaration reveals that flighthelp.eu is coded to target every major airport in the world, including Los Angeles International Airport. (Jordan Decl., ¶ 3.) The evidence consists of a drop-down menu which displays airport “IATA” codes. (See Jordan Decl., Ex. 196.) In other words, a FlightHelp consumer (who could reside anywhere) is given the ability to choose the applicable airport from a list. This evidence does not demonstrate that Wynn deliberately exploited California’s market.

A. Defendant Irina Ioana Ciochiu’s Demurrer is SUSTAINED. Leave to amend is Granted. Plaintiffs are to serve and file the First Amended Complaint within 30 days of this order.

B. Defendant Wynn Capital Management, SRL’s Motion to Quash Service of Summons is Granted.

[1] Plaintiffs explain that the partnership agreement is comprised of oral, written, and implied elements. FlightHelp’s Operating Agreement appears to supply the written portion of the partnership agreement. However, as discussed herein, an “integration” clause in the Operating Agreement presents obstacles to Plaintiffs’ allegations that the partnership agreement is likewise comprised of oral and implied elements.

[2] Irina points out that the Operating Agreement is governed by Wyoming law (see Complaint, ¶ 6, Ex. A, pg. 2), but would not change the result. The court agrees. Wyoming Corp. Code. § 17-29-409(g) provides in relevant part: “In a manager-managed limited liability company, the following rules apply: … (v) A member does not have any fiduciary duty to the company or to any other member solely by reason of being a member.” Wyoming law is in accord with California law on this issue.

[3] To be clear, the court agrees with Jordan that the Complaint sets forth sufficient allegations of Irina’s breaches of the duties of loyalty, care, and fair dealing. But Sections 17704.09 and 15903.05 clearly state that Irina does not owe those duties as a fiduciary.

[4] To the extent Plaintiff alleges a “partnership” independent of FlightHelp, the Complaint is vague. Plaintiffs flip back and forth between claiming the partnership is FlightHelp and there is some unspecified, undefined independent partnership.

[5] To the extent Plaintiff argues Defendants are holding 49% of the “Partnership’s” profits, the Complaint is vague with respect to what partnership is at issue.

[6] The full quotation from the California Supreme Court case is: “In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199.)

[7] The California Supreme Court stated in full:

As observed ante, footnote 7, the final sentences of section 496(a) provide: “A principal in the actual theft of the property may be convicted pursuant to this section. However, no person may be convicted both pursuant to this section and of the theft of the same property.” This language, which was added in 1992, was designed to address difficulties of prosecution in the circumstance in which a thief steals property and then keeps it until after the statute of limitations has run. (See Allen, supra, 21 Cal.4th 846, 858, 89 Cal.Rptr.2d 279, 984 P.2d 486, citing and quoting 4 Stats. 1992, ch. 1146, § 2, p. 5375.) In Allen we characterized the resulting statutory language as “authoriz[ing] a conviction for receiving stolen property even though the defendant also stole the property, provided he has not actually been convicted of the theft.” (Allen, at p. 857, 89 Cal.Rptr.2d 279, 984 P.2d 486.) So viewed, the statutory language is inconsistent with the assertion in Lacagnina’s dictum that section 496(a) contemplates that property must already have been stolen when it comes into the defendant's hands.

Neither, we observe, does more recent federal authority support Lacagnina’s dictum. Granted, when Lacagnina was filed, the cited federal district court's unpublished decision construed the statute as requiring a showing that when the property in question comes into the defendant's hands, it must already have the character of having been stolen. But, as alluded to earlier, on review of the district court's decision in Grouse River, the United States Court of Appeals for the Ninth Circuit appears to have disapproved such a reading of the statute. (Grouse River Outfitters, Ltd. v. Oracle Corp., supra, 848 Fed. Appx. 238, 242–243.) Nor have other federal district courts, in well-reasoned decisions, mentioned any such asserted requirement in the course of applying section 496 and permitting treble damages and attorney's fees in analogous “theft of funds” circumstances. (See Allure, supra, 606 B.R. 51, 63–66; Otte, supra, 624 B.R. 883, 911–913.)

(Siry Inv., L.P. v. Farkhondehpour, supra, 13 Cal. 5th at p. 354, fn. 8.)

[8] Irina also argues that this cause of action is inconsistent with Plaintiffs’ conversion claim. The challenge is not well taken. To the extent the claims for conversion and accounting are inconsistent, it is well-settled that “modern rules of pleading generally permit plaintiffs to set forth alternative theories in varied and inconsistent counts[.]” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388.) The ninth cause of action does not fail for inconsistency.

[9] Indeed, Plaintiffs’ own evidence confirms that Wynn’s principal place of business is Romania. (See Jordan Decl., Ex. 194 (FlightHelp’s standard ‘Assignment Form’ stating that “WYNN CAPITAL MANAGEMENT SRL, with the principal place of business in Caiova, str. Paringului, nr. 72A jud. Dolj, tax registration number 47078863, J16/2956/26/10.2022[.]”].)