Judge: Marcella O. Mclaughlin, Case: 37-2023-00011728-CU-CO-CTL, Date: 2024-01-12 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - January 11, 2024

01/12/2024  01:30:00 PM  C-72 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Marcella O McLaughlin

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Civil - Unlimited  Contract - Other Demurrer / Motion to Strike 37-2023-00011728-CU-CO-CTL JAY GILL TRUSTEE OF THE RJ GILL FAMILY 2021 NG DYNASTY TRUST VS MARX CAUSAL DOCUMENT/DATE FILED: Demurrer, 10/10/2023

The demurrer to the complaint is SUSTAINED in part and OVERRULED in part.

A. The general demurrer to count 1 is sustained with leave to amend as to defendant John Marx.

'Where fraud is alleged to be the object of the conspiracy, the claim must be pleaded with particularity.' Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1136.

In this case, insufficient facts have been pled with the required particularity to state a claim for conspiracy to commit fraud. Plaintiff has not alleged that John had knowledge of and agreed to both the objective and the course of action that resulted in the injury to plaintiff. See Spencer v. Mowat (2020) 46 Cal.App.5th 1024, 1037; see also See Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823.

B. The general demurrer to count 1 is overruled as to defendant Bud Marx.

'[A] duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.' LiMandri v. Junkins (1997) 52 Cal.App.4th 326, 337. Concealment also exists when 'a party to a transaction, who is under no duty to speak, nevertheless does speak and suppresses facts which materially qualify the facts stated.' Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1164-65.

Here, plaintiff alleges that Bud induced him to enter into a transaction – i.e., invest $1 million in Quantum – by concealing various facts about the company. These facts are sufficient to state a claim for fraudulent concealment. Whether the allegedly concealed facts were material is a question for another day. See id. at 1163 ('Materiality is a question of fact for the jury[.]').

Having concluded that the concealment claim has been sufficiently pled with the required particularity, the court need not plaintiff's other fraud theories. 'A demurrer does not lie to a portion of a cause of action.' PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682.

C. The general demurrer to count 2 is overruled.

The shareholders of a corporation may bring a derivative suit to enforce the corporation's rights and redress its injuries when the board of directors fails or refuses to do so. Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1008. An action is deemed 'derivative' if the gravamen of the complaint is injury to the Calendar No.: Event ID:  TENTATIVE RULINGS

3049880  48 CASE NUMBER: CASE TITLE:  JAY GILL TRUSTEE OF THE RJ GILL FAMILY 2021 NG DYNASTY TRUST  37-2023-00011728-CU-CO-CTL corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets. Id. In this case, liberally construing the complaint as a whole, plaintiff alleges that Bud induced him to invest $1 million in Quantum. Thus, as currently pled, the gravamen of plaintiff's breach of fiduciary duty claim is injury to himself directly rather than to Quantum. See Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 297 (holding that gravamen of injury was to shareholder who alleged that Jones Day deceived him into exchanging his valuable stock in Monsterbook for worthless stock in Transmedia); see also Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525 (shareholder could sue in his own right for being fraudulently induced to invest in a project which was used to form a corporation; fact that corporation was also harmed did not preclude his lawsuit).

D. The special demurrer to count 3 is overruled. The rescission claim is not 'so incomprehensible' that defendant Quantum is unable to reasonably respond to it. Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.

E. 'Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.' Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227. Accordingly, plaintiff is granted leave to amend count 1 as to defendant John Marx. Plaintiff must file and serve the FAC by January 22, 2024. Defendants Bud Marx and Quantum must file and serve answers to the FAC pursuant to Code.

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