Judge Lynne M. Hobbs, Case Number: 23STCV02764, Date: 2024-07-01 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 23STCV02764, Date: 2024-07-01 Tentative Ruling

Case Number: 23STCV02764 Hearing Date: July 1, 2024 Dept: 61

BR CO I, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, SUING INDIVIDUALLY AND DERIVATIVELY ON BEHALF OF COOKIES CREATIVE CONSU vs GILBERT MILAM, et al.

TENTATIVE

Plaintiff Nedco, LLC’s Motion for Relief from Stay is GRANTED.

No sanctions are awarded.

Plaintiff to provide notice.

DISCUSSION

“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489.) The decision of a trial court to stay proceedings is thus generally a matter of discretion. (Bains v. Moores (2009) 172 Cal.App.4th 445, 480.)

Plaintiff Nedco, LLC (Plaintiff) moves for relief from the stay entered by this court on October 11, 2023, on the grounds that Plaintiff BR CO I, LLC (BR) has dismissed its claims in this action, and therefore there is no longer any overlap of ownership or parties between this derivative action and the arbitration now pending between Red Tech Holdings, LLC and Gron Ventures Fund I, LP and Cookies, which formed part of the basis for this court’s entry of the stay in October 2023. (Motion at p. 2.) Plaintiff argues that the dismissal of BR CO from this action eliminates any overlap of the parties, and thus any concern of unfair advantage to be derived from concurrent proceedings. (Motion at pp. 10–11.)

This court ordered the October 2023 stay based on the substantial identity of issues in the Red Tech arbitration and this action, as well as Defendants’ demonstration of overlapping ownership and management between BR CO, Red Tech, and Gron. The court ruled:

In the prior motion, Plaintiffs and this court relied on the case Gregg v. Superior Court (1987) 194 Cal.App.3d 134, in which the appellate court determined that the trial court had abused its discretion by ordering a stay in an action between a plaintiff franchisee against a defendant franchisor, where the claims asserted by the plaintiff were similar to other claims pursued by other franchisees through the same attorney against the same defendant in federal court. (Id. at pp. 137–138.) The court noted that the plaintiff before them was “not a party to a related action in another forum,” and stated, “We find no precedent for preventing a litigant in the circumstances of this case from pursuing an action because other litigants are suing the same defendants over similar grievances in another forum.” (Id. at p. 138.) The court in that case determined that the litigants were not “substantially identical,” and that the claimant in the case before it was proceeding “in the only forum which could provide him with relief.” (Id. at p. 138.)

This case is different from Gregg. That case involved an individual plaintiff seeking personal relief separate from the relief requested by other parties in a different action. As the court stated, “Significant to this case is the fact that petitioner seeks personal relief from contracts and damages for fraud and unlawful business practices directed toward him.” (Gregg, supra, 194 Cal.App.3d at p. 138.) Plaintiffs in the present case, however, seek no relief personal to them, but bring a derivative action on behalf of Cookies, for the same misconduct asserted in the arbitration. Additionally, Defendants have presented evidence showing substantial identity of the parties prosecuting this litigation and the concurrent arbitration, namely through the fact that Plaintiff BR CO I is controlled by the same individual who controls the arbitration claimants.1 The inference of shared control is buttressed by the similar allegations in both proceedings, the fact that all claimants are represented by the same counsel, and the service of BR CO’s demand letter in conjunction with the Claimants’ initiation of arbitration. Defendants have shown sufficient identity of parties and issues to warrant the requested stay, and Plaintiffs have shown no countervailing prejudice that could result.

The dismissal of BR from this case substantially obviates the concerns that motivated the entry of the stay. There is no indication that Nedco, as the remaining derivative plaintiff, possesses overlapping management or ownership with the plaintiffs in the Red Tech action. Although Defendants in opposition argue that Nedco’s outside counsel, Breton Peace — not Nedco’s counsel in this action — is elsewhere litigating claims for damages against Cookies, there is no indication that Peace’s association with these other claims renders Nedco conflicted out of the present case. (Opposition at pp. 13–14.)

Defendants also argue that BR has not actually been dismissed from this case, as court approval is required for dismissal of derivative actions, in whole or in part. (Opposition at p. 10.) It is true that “a stockholder bringing such a derivative suit is a trustee for the corporation's cause of action and as such cannot dismiss the action without the consent of the trial court.” (Ensher v. Ensher, Alexander & Barsoom, Inc. (1960) 187 Cal.App.2d 407, 410.) However, this rule is of doubtful application here, as BR’s dismissal of itself from the case does not work a dismissal of the action, or any of the claims asserted therein. (See ibid.) Nor is there any contention that BR’s dismissal is the product of a compromise requiring court approval. (See Russell v. Weyand (1935) 5 Cal.App.2d 259, 262.)

Defendants finally argue that the stay should be maintained because allowing the present litigation to proceed would force Cookies into a difficult position between this action and the arbitration. (Opposition at p. 11–13.) However, the authorities that Defendants cite relate to the staying of shareholder derivative actions when related to ongoing securities class actions. (See Rosenblum ex rel. Amgen, Inc. v. Sharer (C.D. Cal., July 28, 2008, No. CV 07-6140 PSG PLAX) 2008 WL 9396534, at *8; In re STEC, Inc. Derivative Litigation (C.D. Cal., Jan. 11, 2012, No. CV 10-00667-JVS MLGX) 2012 WL 8978155, at *4 [“Courts generally stay a shareholder derivative suit until the culmination of a securities class action when the cases arise from the same factual allegations and the evidence in the former could jeopardize the company's defense in the latter.”]; Breault v. Folino (C.D. Cal., Mar. 15, 2002, No. SACV010826GLTANX) 2002 WL 31974381, at *2.) No such class action is presented here.

The motion is therefore GRANTED.