Judge: Malcolm Mackey, Case: 22STCV04300, Date: 2023-02-14 Tentative Ruling

Case Number: 22STCV04300    Hearing Date: February 14, 2023    Dept: 55

KERNER v. BIG TOKEN, INC.                                                     22STCV04300

Hearing Date:  2/14/23,  Dept. 55

#5:   DEMURRER TO SECOND 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, as to which a demurrer was sustained with leave to amend.

On 10/17/22, Plaintiff filed a Second 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 demurrers, on grounds including the following:

·         Kerner’s third cause of action for inducing breach of contract fails to state facts sufficient to constitute a cause of action against SRAX, Inc.

·         A company cannot induce breach of its own contract.

·         SRAX is not an alleged stranger to the contract.

·         The claim is based on the actions of two officers of Defendant Force Protection Video Equipment Corp. (FPVD), alleged to have been acting as agents of FPVD at the time of the alleged breach of FPVD of its contract with Kerner. 

·         Kerner also alleges that at all relevant times SRAX: (1) was an employee, officer, director, principal and/or managing member of FPVD and Big Token acting within the course and scope of its employment and (2) was the agent of FPVD and Big Token acting within its granted authority.

·         Kerner’s bare allegation Mr. Miglino and Mr. Silvestre also hold positions with SRAX (an investor in FPVD) does not change this result, particularly where the Second Amended Complaint alleges unequivocally both Mr. Miglino and Mr. Silvestre were acting in their capacity as agents of FPVD at the time of the alleged breach.

·         Kerner may not avoid defects of his earlier pleadings by omitting facts that made the earlier pleadings defective or alleging new facts inconsistent with the allegations of the earlier pleadings.

RP Positions

Opposing party advocates overruling, for reasons including the following:

·         A demurrer is improper to resolve a fact question as to the predominant purpose of agents.  GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 883 (“A resolution of this issue turns on the parent or subsidiary’s predominate purpose in inducing the breach of contract. Thus, the question on the issue of privilege is a question for the trier of fact.”).

·         Plaintiff and Big Token/FPVD were parties to Plaintiff’s employment contract that non-contracting-party SRAX knew about, and took actions intended to cause FPVD to breach.

·         The fact that SRAX was the parent company of FPVD makes no difference. An entity can be liable for inducing the breach by a related, but separate, entity, depending on the predominant purpose. GHK, supra, at 863-64.

Tentative Ruling

The demurrer is overruled.

Twenty days to answer.

Plaintiff sufficiently amended to allege that demurring party was not an agent of a contracting party, based upon a predominant purpose  (Second Amended Complaint, ¶ 32  (“Plaintiff is informed and believes that the predominate purpose of the actions of Miglino and Silverstre was to protect SRAX, Inc. from having to publicly disclose the options grant to Plaintiff.”)).   See  GHK Assocs. v. Mayer Grp., Inc. (1990) 224 Cal. App. 3d 856, 883  (“privilege of a parent or subsidiary corporation to interfere with the contractual relationship of the other ‘is at most a qualified one dependent for its existence upon the circumstances of the case’….  A resolution of this issue turns on the parent or subsidiary's predominant purpose in inducing the breach of contract.”).  See also generally  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).

There is no inconsistency with the First Amended Complaint, because it did not address specifically the predominant purpose of Defendant’s actors, as does the Second Amended Complaint for the first time.

Where a pleading contradicts, or omits facts pled in, prior complaints, judges have discretion to take judicial notice of the earlier allegations and disregard inconsistent ones, absent the pleader’s satisfactory explanation. State of Cal. ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal. App. 4th 402, 412;  Holland v. Morse Diesel Internat. (2001) 86 Cal. App. 4th 1443, 1447;  Berman v. Bromberg  (1997) 56 Cal.App.4th 936, 946 (perceiving no inconsistency or sham pleading).  The rule that pleaders cannot without explanation omit allegations, “does not mean that every word dropped in a pleading becomes a binding admission by which the pleader is forever bound.”  Schmidlin v. City of Palo Alto (2007) 157 Cal. App. 4th 728, 755.

Where there is any inconsistency between the specific allegations upon which a conclusion must be based and the conclusion, the specific allegations control.  Careau & Co. v. Sec. Pac. Bus. Credit (1990) 222 Cal. App. 3d 1371, 1390;  Stowe v. Fritzie Hotels, Inc. (1955) 44 Cal. 2d 416, 422.  B & P Dev. Corp. v. City of Saratoga (1986) 185 Cal. App. 3d 949, 953.  “Inconsistent general statements are modified and limited by specific factual allegations.”  Cansino v. Bank of Amer. (2014) 224 Cal. App. 4th 1462, 1468.