Judge: Kevin C. Brazile, Case: 20STCV44984, Date: 2023-03-03 Tentative Ruling

Hearing Date: March 3, 2023

Case Name: Donohoo v. Tercek, et al.

Case No.: 20STCV38151

Matter: Demurrer

Moving Party: Cross-Defendant Angus Donohoo

Responding Party: Cross-Complainant Robert Tercek

Notice: OK

Ruling: The Demurrer is sustained, without leave to amend.

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

On September 7, 2021, Plaintiff Angus Donohoo, individually and derivatively on behalf of Venture Intellect Associates, LLC (“VIA”), filed the operative Second Amended Complaint (“SAC”) against Defendants Robert Tercek and Direct Education Worldwide, Inc. (“DEW”) for (1) breach of contract, (2) breach of fiduciary duty, (3) intentional misrepresentation, (4) false promise, (5) unjust enrichment, (6) constructive trust, (7) involuntary dissociation of member, (8) accounting, (9) declaratory relief, (10) intentional infliction of emotional distress, and (11) negligent infliction of emotional distress.  The allegations of the SAC are as follows.  Donohoo and Tercek were members of VIA, which provided consulting services to and investments in various businesses.  Ownership and profits were to be split equally between Donohoo and Tercek.  Donohoo worked with Tercek on a project involving DEW, believing the project was an asset of VIA based on Tercek’s representations.  Subsequently, Tercek told Donohoo that DEW was not a VIA project so Donohoo was deprived of the profits he would be entitled to under VIA’s operating agreement.  

On October 27, 2022, Tercek filed a Second Amended Cross-Complaint (“SACC”) against Donohoo for (1) conversion, (2) intentional interference with prospective economic relations, (3) fraud, (4) breach of fiduciary duty, (5) breach of fiduciary duty, (6) breach of contract, (7) intentional infliction of emotional distress, and (8) involuntarily withdrawal.

Cross-Defendant Donohoo demurs to the SACC’s fraud claim for uncertainty and failure to state sufficient facts.  Specifically, Donohoo argues that Tercek fails to properly plead damages.

When considering demurrers, courts read the allegations liberally and in context, and “treat 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.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. 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.)  It is error “to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.”  (Aubry v. Tri-City Hospital Dist.¿(1992) 2 Cal.4th 962, 967.)

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, internal quotation marks omitted.) 

“[F]raud must be pled specifically; general and conclusory allegations do not suffice. [Citations] Thus the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.  This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, internal quotation marks omitted.)  

The Court previously ruled as follows: “The FACC fails to plead damages.  Tercek asserts he paid expenses to obtain the fraudulent statement of information, but this document is available for free on the California Secretary of State’s website.  Further, it is not apparent why there would be accountant costs, and fees for attorney investigation would not seem to be damages.  (See Stokus v. Marsh (1990) 217 Cal.App.3d 647, 656.)  Tercek also states he will have to pay fees if Capozzola is replaced by a third-party, but this has not actually happened and would, in any case, be at Tercek’s election.  Tercek further claims business and emotional distress damages from having company communications diverted, but, there are no specific business damages asserted, and, as the Court previously ruled, ‘[i]t is not clear how Tercek would suffer emotional distress because the prior iteration of VIA’s statement of information stated that Donohoo was the agent for service and also omitted Tercek’s information under the CEO area.  Additionally, the prior corporate address for VIA was associated with a former member, and Donohoo’s address was listed for mailing.  That is, based on the prior statement of information, Tercek did not apparently obtain direct correspondence relating to VIA.  Therefore, it is not apparent how Tercek has been emotionally affected by the filing of the new statement of information.’  Tercek argues that it is wrong to contend that Donohoo and his counsel, Capozzola, are the same because Capozzola does not owe fiduciary duties to Tercek, and, given this lawsuit, Capozzola cannot communicate directly with Tercek.  But, the contact-point for VIA need not be a fiduciary, as Tercek has contemplated.  Further, it is not apparent how Tercek has suffered fraud damages because he must communicate with Capozzola through counsel.  For one thing, there is technically nothing stopping Tercek from communicating with Donohoo directly to obtain information from Capozzola, as Capozzola is Donohoo’s agent.  Further, any damages associated with using counsel for business communications would seem to be directly caused by the existence of this lawsuit, more so than fraud itself.”

The SACC fails to remedy the FACC, only adding allegations that Tercek spent $270 on a bookkeeper to unravel Donohoo’s scheme, as well as additional costs from the bookkeeper allegedly communicating with an accountant.  Respectfully, these conclusory damages shall be ignored because the information Tercek sought was two-clicks away on the internet.  

Because the SACC fails to plead damages, the Demurrer is sustained.  Leave to amend is denied because Tercek has shown that he cannot remedy this deficiency through an amendment.  The Request for Judicial Notice is granted.

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.