Judge: Malcolm Mackey, Case: 22STCV04300, Date: 2022-09-27 Tentative Ruling

Case Number: 22STCV04300    Hearing Date: September 27, 2022    Dept: 55

KERNER v. BIG TOKEN, INC.                                                     22STCV04300

Hearing Date:  9/27/22,  Dept. 55

#7:   DEMURRER TO FIRST AMENDED COMPLAINT. 

Notice:  Okay

Opposition

MP:  Defendant SRAX, INC.

RP:  Plaintiff

Summary

On 2/3/22, Plaintiff LOU KERNER filed a Complaint.

On 4/4/22, Plaintiff filed a First Amended Complaint, alleging that Defendant breached a written agreement to employ Plaintiff as CEO, by terminating his employment based upon pretexts of self-dealing and conflicts of interest, and refusing to pay monetary severance pay and to deliver stock options.

The causes of action are:

1.      BREACH OF EMPLOYMENT AGREEMENT

2.      WRONGFUL TERMINATION

3.      INDUCING BREACH OF CONTRACT.

MP Positions

Moving party requests an order sustaining the demurrer to the First Amended Complaint, on grounds including the following:

·         The only cause of action against SRAX – inducing breach of contract – is based solely on the actions of two officers who Kerner alleges were acting as agents of the contracting party when committing an alleged breach.

·         Kerner alleges that the breach of his Employment Agreement was caused, and induced, by the same individuals acting as agents of the contracting party, FPVD and SRAX.

·         Only a stranger to the contract can be liable for interfering with the contract.

RP Positions

Opposing party advocates overruling, or leave to amend, for reasons including the following:

·         A parent corporation can be liable for inducing its subsidiary to breach a contract. Liability depends on the “predominate purpose” of the individuals acting on behalf the corporate parties. GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 883.

·         A parent company, here SRAX, can be liable under California law for inducing its subsidiary, here FPVD, to breach a contract.

·         The specific allegations control over the general agency allegations.  the Third Cause of Action specifically alleges that SRAX used its influence as FPVD’s parent company to induce FPVD to breach the Employment Contract. (FAC, ¶ 31.)

Tentative Ruling

The demurrer is sustained, with 20 days’ leave to amend.

The First Amended Complaint contains allegations, including general agency allegations, that appear to go against the rule that agents cannot be liable for interference with their contracts.  See, e.g.,  Mintz v. Blue Cross of Cal. (2009) 172 Cal. App. 4th 1594, 1604, 1606, 1607 n. 5  (representatives of contracting parties, including corporate agents, cannot be liable for intentional or negligent interference with their principals’ contracts).

“[T]he existence of an agency relationship is the ‘essential fact,’ and where alleged must be accepted as true.”  Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 886.

However, the opposition shows a reasonable possibility of successful amendment, by amending to allege specifically that demurring party was not an agent including based upon a predominant purpose.

Leave to amend must be allowed where there is a reasonable possibility of successfully stating a cause of action.  Schulz v. Neovi Data Corp. (2007) 152 Cal. App. 4th 86, 92.