Judge Margaret L. Oldendorf, Case 22GDCV00119 2022-12-09 Tentative Ruling

Judge: Margaret L. Oldendorf, Case: 22GDCV00119, Date: 2022-12-09 Tentative Ruling

Case Number: 22GDCV00119 Hearing Date: December 9, 2022 Dept: P

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

NORTHEAST DISTRICT

HYUNDAI OF GLENDALE, LLC,

Plaintiff,

vs.

JAE PARK, and DOES 1 through 50, inclusive,

Defendants.

And related cross-action.

)

)
)

)

Case No.: 22GDCV00119

[TENTATIVE] ORDER SUSTAINING IN PART AND OVERRULING IN PART CROSS-DEFENDANT HYUNDAI OF GLENDALE, LLC’S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT

Date: December 9, 2022

Time: 8:30 a.m.

Dept.: P

I. INTRODUCTION

This litigation concerns the business dealings of the companies and individuals who operated an auto dealership, Hyundai of Glendale, LLC (Glendale Hyundai), located at 411 S. Brand in Glendale. Glendale Hyundai initiated this litigation by suing Jae Park (Park) for trespass, alleging that though it had terminated his employment Park continued to return to the property.

Glendale Hyundai obtained a preliminary injunction prohibiting Park from returning to the property. Thereafter, Glendale Hyundai filed an amended pleading adding causes of action for breach of contract, breach of fiduciary duty, fraud, accounting, declaratory relief, intentional interference with contractual relations, and intentional interference with economic advantage. Park answered and filed a cross-complaint. The cross-complaint alleges claims not only against Glendale Hyundai but also against Auto Holdings, LLC (Auto Holdings) and John Hurry (Hurry), individually and as trustee of the Veicolo Trust and the Mama Bear Trust. Auto Holdings has responded by seeking an order compelling Park to arbitrate his claims. Hurry responded by specially appearing to challenge service. Glendale Hyundai has filed a motion seeking leave to file a Second Amended Complaint.

At issue is Glendale Hyundai’s demurrer to Park’s First Amended Cross-Complaint (FAXC). For the reasons discussed below, the demurrer is sustained as to the 4^th cause of action for interference with contractual relations and is otherwise overruled.

II. LEGAL STANDARD

Code Civ. Proc. §430.10(e) provides for a demurrer on the basis that a complaint fails to state a cause of action. A demurrer admits, provisionally for purposes of testing the pleading, all material facts properly pleaded. Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1247. A demurrer is treated as “admitting all material facts properly pleaded,” but not the truth of “contentions, deductions or conclusions of law.” Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4^th 962, 966-967.

The general rule on demurrer is that the pleadings are “deemed to be true, however improbable they may be.” Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.4^th 593, 604.

Code Civ. Proc. §430.10(f) provides for a demurrer where a pleading is uncertain.

Only where a pleading is so uncertain a defendant cannot determine what must be admitted or denied is a demurrer for uncertainty appropriate. Khoury v. Maly’s of California (1993) 14 Cal.App.4^th 612, 616.

III. DISCUSSION

A. Summary of Pleadings

1. Glendale Hyundai v. Park

In the main action, Glendale Hyundai alleges that it is a California limited liability company that owns and operates the Hyundai dealership at issue pursuant to an operating agreement attached as Exhibit 1 (Glendale Hyundai Operating Agreement). It further alleges that at all times it has had a single member: Auto Holdings, LLC, of which Park is a 10% owner. The Auto Holdings Operating Agreement is attached as Exhibit 2. Management of Auto Holdings was vested in Newmgmt, LLC, which had exclusive power to manage and control the company. Glendale Hyundai alleges that from August 2016 to March 4, 2022, Park was employed as its general manager and in that capacity controlled the day-to-day running of the business including its employees, bank accounts, financial reports, etc.

Glendale Hyundai alleges that prior to terminating Park’s employment in March 2022, Park had prevented access to business records and thus prevented supervision of his actions. Glendale Hyundai alleges it began to suspect that Park was misappropriating funds and so it hired a third-party expert to review company records. Glendale Hyundai alleges this review revealed that Park had overstated accounts receivable and inventory and consequently the company’s income and had based thereon paid himself thousands of dollars of unearned bonuses. Glendale Hyundai further alleges that Park reimbursed himself hundreds of thousands of dollars for purported business expenses without submitting receipts to justify them, and that he may have embezzled and/or commingled funds by depositing Glendale Hyundai’s accounts receivable into his personal account.

Glendale Hyundai alleges it discovered in November 2021 that Park had materially breached his employment agreement, citing Section 3(b), which provides for a monthly 15% bonus (which Park is alleged to have increased by inflating the company’s income) and Section 4, which requires written approval for any reimbursement over $1,000.

Glendale Hyundai alleges that as a result of Park’s conduct, the franchisor took steps to terminate the franchise, employees were terminated, and vendors have refused to do business with the new management.

2. Park v. Glendale Hyundai, Auto Holdings, Hurry

The operate FAXC alleges that at all relevant times, Park was an employee, the general manager, owner, and Dealer Principal of Glendale Hyundai and owned a 10% interest in Auto Holdings. Park alleges that Hurry, individually and as trustee of the Viecolo Trust and the Mama Bear Trust, operates and manages Auto Holdings and is the alter ego of Glendale Hyundai, Auto Holdings, Viecolo Trust, and Mama Bear Trust. He further alleges that pursuant to an amendment to the Auto Holdings Operating Agreement in March 2019, the owners are stated as Viecolo Trust and Park. FAXC, ¶5 and Exhibit 1.

Park alleges that at the same time he entered into the Auto Holdings Operating Agreement he entered into an Option Agreement with Hyundai Glendale for the right to purchase a 10% interest. Park alleges that he exercised that option as evidenced by a $500,000 Note which he paid in full, making him a 10% owner of Glendale Hyundai. FAXC, ¶¶8-10 and Exhibit 2 (Option Agreement). Park alleges that pursuant to this agreement he was entitled to 10% of Glendale Hyundai’s monthly revenue and that for years this was paid by “Hurry’s office personnel,” and further, that Hurry’s business also issued K-1 partnership reports showing Park’s ten percent ownership interest in both Glendale Hyundai and Auto Holdings.

Park alleges that concurrent with these agreements, he entered into an employment agreement with Glendale Hyundai, noting that a copy is attached as Exhibit 3 to Glendale Hyundai’s pleading. Pursuant to that agreement, Park was entitled to an annual salary plus monthly cash bonuses of 15% of net profits as well as reimbursement of business expenses, for which written approval was need for amounts over $1,000 except that reimbursement for travel expenses was exempted from this requirement.

Park alleges that in addition to the employment agreement, Park is also named as a manger of Glendale Hyundai in its Operating Agreement along with Auto Holdings as shown in Exhibit 1 to Glendale Holding’s pleading.

Park alleges the total purchase price for Glendale Hyundai was $4,900,000 and that he paid his share in installments with the final payment being paid in November 2020. He makes allegations about how well the business operated while he was manager but that there were operational problems caused by Hurry as well as Covid and that in mid-2020, Hurry hired an accountant named Vince Ownbey to analyze the books and records. Park alleges that as a result of this accounting, Ownbey found there was nothing wrong with how the company was wrong and that Park had not misappropriated any money and had in fact invested in money in the business while Hurry had refused to do so. Park alleges that another industry expert, Jim Kelley, reached the same conclusion. Ownbey thereafter separated from Hurry because he was concerned about his conduct. [In opposing this demurrer, Park requests judicial notice of the Declaration of Vince Ownbey, filed in connection with his opposition to Glendale Hyundai’s motion for preliminary injunction. That request is granted, although only for the document’s existence, not the truth of any matter stated therein. Evid. Code §452(d); Freemont Indemnity Co. v. Freemont General Corp. (2007) 148 Cal.App.4^th 97, 113-114.]

Park alleges Hurry treated capital contributions as loans and improperly charged the business interest. Other financial improprieties are also alleged. Park alleges that in November 2020 Cross-Defendants stopped paying him his 10% profit distribution in breach of the employment agreement, option agreement and promissory note agreements, and that in 2022 they stopped paying his salary and management fee. In January 2021, Glendale Hyundai “purported to issue a corporate resolution by Auto Holdings, its sole member, declaring that there would be only one manager” of Glendale Hyundai (Exhibit 3), but that this was of no force or effect since it did not involve the election of new managers as required by Section 4.1. Park alleges Hurry tried to change company policy and began using this new policy to deny or contest reimbursements Park was lawfully owed.

Described in more detail below, Park alleges that despite the fact he was named as Dealer Principal with the sole right to operate the business and that Hurry was merely an investor, Hurry began demanding a more active role in the business, the ultimate result of which was that the franchisor terminated the franchise.

Finally, Park alleges that Cross-Defendants refused to allow the business to be sold when Park could receive a buy-out and instead arranged for a corporate resolution of Auto Holdings that diluted his interest to 1% before agreeing to a sale of the business.

B. Alter Ego Allegations

“In California, common principles apply regardless of whether the alleged alter ego is based on piercing the corporate veil to attach liability to a shareholder or to hold a corporation liable as part of a single enterprise. In both cases, ‘[t]he law as to whether courts will pierce the corporate veil is easy to state but difficult to apply.’ (Citation.) Because it is founded on equitable principles, application of the alter ego ‘is not made to depend upon prior decisions involving factual situations which appear to be similar.... “‘It is the general rule that the conditions under which a corporate entity may be disregarded vary according to the circumstances of each case.’” ’ (Citations.) Whether the evidence has established that the corporate veil should be ignored is primarily a question of fact which should not be disturbed when supported by substantial evidence. (Citations.)

“ ‘Factors for the trial court to consider include the commingling of funds and assets of the two entities, identical equitable ownership in the two entities, use of the same offices and employees, disregard of corporate formalities, identical directors and officers, and use of one as a mere shell or conduit for the affairs of the other. [Citation.] “‘No one characteristic governs, but the courts must look at all the circumstances to determine whether the doctrine should be applied. [Citation.]’” [Citation.]”’ (Citations.)” Toho Towa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096, 1108-1109.

The FAXC contains extensive allegations of alter ego liability, which have importance not only here but in motions by other Cross-Defendants being heard concurrently with Glendale Hyundai’s demurrer. For that reason, the allegations are examined in some detail here.

The FAXC contains alter ego allegations at ¶¶ 4 and 30.

“4. Cross-Defendant John Hurry, individually, and as trustee of the Veicolo Trust, and as Trustee of the Mama Bear Trust, operates and manages Auto Holdings, and is the alter ego of Hyundai, Auto Holdings, Veicolo Trust and Mama Bear Trust. John Hurry, individually, and as a trustee, does business in California and is directly involved in the transactions in this state which are at issue in this case, and thus this court has jurisdiction over John Hurry, individually and as a trustee of the Veicolo Trust and Mama Bear Trust. For ease of reference, cross-defendant John Hurry, individually and as a trustee, and as a purported manager, will be referred to herein as Hurry, unless otherwise specified. Park is informed and believes, and based thereon alleges, that Hurry has a residence in the state of Arizona as well as in California.”

“7. At all relevant times, each of the cross-defendants was or is now the agent or employee of the remaining cross-defendants, and each was acting within the course and scope of such agency or employment. The term Cross-Defendants when used herein refers to all Cross-Defendants, collectively.”

“30. Hurry, at all times relevant mentioned herein, was the alter ego of the entities named in this cross-complaint, and there was a unity of interest and ownership which exists between Hurry, individually and the other cross-defendants named herein. Hurry routinely used the shield of the businesses entities named herein to commit fraud and other misconduct. He failed to observe corporate formalities, as evidenced by refusal to appropriately obtain authorization of corporate acts, and severely undercapitalized the Hyundai dealership, as evidenced by refusing to invest money in the business other than the purchase price, insisting that the minority owner (Park) instead be responsible for capitalizing the business and flooring operations, and by unilaterally deducting arbitrary fees from corporate revenue. Hurry further used the management structure of Auto Holdings and Hyundai, as well as his status as a trustee, to misappropriate money from the revenues of Hyundai, commingle funds belonging to Hurry and the entities, intentionally dilute Park’s ownership share, and impose loans as an obligation on the business enterprise which were shams in order to funnel money to Hurry, individually, and to facilitate his use funds for other than corporate purposes. Hurry and the cross-defendants which are entities also used the entities as a mere shell, instrument or conduit for a single business venture to the benefit of Hurry, individually, and failed to maintain arms lengths relationships among the entities. Hurry and the entities also failed to maintain adequate corporate records and/or confusion of the records of the separate entities, used the same office in Arizona for the business of the entities, used the same bank accounts and had overlapping officers and directors. It would be an injustice to refuse to impose alter ego liability since otherwise creditors, such as Mr. Park, would be denied any legitimate remedy.”

These allegations are sufficient to meet the standard for alleging alter ego liability. Glendale Hyundai raises no argument in its demurrer as to the sufficiency of these allegations. Moreover, by demurring it accepts them as true for purposes of the analysis.

Glendale Hyundai argues Park has “blanketly” alleged all nine causes of action in a shotgun fashion against all Cross-Defendants, rendering the pleading uncertain. This demurrer argument is overruled. Between the agency allegation and the alter ego allegation, to the extent any cause of action is sufficiently alleged one Cross-Defendant, it is sufficiently alleged as to all three.

All three Cross-Defendants are represented by the same counsel, and the demurrer raises arguments as to the other two. A number of times throughout the demurrer it is argued that Park’s claims against Auto Holdings and Hurry are subject to an arbitration provision in the Operating Agreement, and that Hurry is specially appearing to contest jurisdiction. It is difficult not to perceive these arguments as confirmation of the blended existence of all Cross-Defendants and further, not to perceive these as general appearances that seek affirmative relief. Those issues are addressed more thoroughly in the other motions being heard this date.

C. Analysis of Demurrer Arguments

Glendale Hyundai demurs to each of the nine causes of action.

1^st Cause of Action – Breach of Contract

Elements: “To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff.”

Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.

Allegations

¶33- Park entered into the option agreement, promissory note agreement, employment agreement, operating agreement of Auto Holdings, and the operating agreement with Glendale Hyundai.

¶34- Park performed all the obligations of the agreements with the exception of any provision that he was excused from performing.

¶¶35, 36 - Cross-defendants breached the agreements by:

Failing and refusing to pay Park the profit distribution, management fees, salary, expense reimbursement and other benefits owed thereunder;

Terminating Park’s employment in breach of the terms of the employment agreement;

Removing Park as manager of Glendale Hyundai by an invalid corporate resolution;

Failing and refusing to purchase Park’s ten percent ownership interest and failing and refusing to agree to the terms of an asset sale of Glendale Hyundai to a qualified buyer;

Terminating Park as a manger without conducting an election of new managers in accordance with paragraph 4.1 of the operating agreement of Glendale Hyundai.

¶37- As a result of Cross-Defendants’ breach of said agreements, Park has been damaged in excess of $3 million.

The pleading adequately alleges each element required for breach of contract.

Glendale Hyundai’s demurrer argument that the pleading is defective because it fails to attach all five of the agreements that it references is overruled. This argument fails because the pleading either attaches the relevant agreements or they are attached to Glendale Hyundai’s own pleading. The demurrer for failure to state sufficient facts is overruled.

Glendale Hyundai is a party to the Glendale Hyundai Operating Agreement (Exhibit 1 to the FAC), the Option Agreement (Exhibit 2 to the FAXC), and the Employment Agreement (Exhibit 3 to the FAC). Glendale Hyundai has itself sued on some of these very agreements. Its argument that the pleading is impermissibly vague because it cannot tell which allegations to respond to is not well taken. The demurrer for uncertainty is overruled.

2^nd Cause of Action For Wrongful Termination

Elements:

“The tort cause of action for wrongful termination in violation of public policy provides a vehicle for recourse that otherwise would be unavailable under general rules of the at-will employment doctrine. First recognized by the California Supreme Court in Tameny v. Atlantic Richfield Co., this public policy exception allows an employee to bring a tort cause of action against an employer who terminates an at-will employment on a ground that violates fundamental public policy. The exception is based on the principle that, although an employer may terminate an at-will employee for no reason, or any arbitrary or irrational reason, the employer has no power to terminate the employee for a reason contrary to the law or fundamental public policy.

“Despite broad acceptance of the public policy exception, ‘[t]he difficulty ... lies in determining where and how to draw the line between claims that genuinely involve matters of public policy, and those that concern merely ordinary disputes between employer and employee. This determination depends in large part on whether the public policy alleged is sufficiently clear to provide the basis for such a potent remedy.’

“To support a wrongful discharge claim, the policy must be ‘(1) delineated in either constitutional or statutory provisions; (2) ‘“public”’ in the sense that it ‘“inures to the benefit of the public”’ rather than serving merely the interests of the individual; (3) well established at the time of the discharge; and (4) substantial and fundamental.’” Phillips v. St. Mary Regional Medical Center (2002) 96 Cal.App.4th 218, 225-226, footnotes omitted.

Allegations:

Here, the allegation is that Park was employed by all three Cross-Defendants (FAXC, ¶40) and that in violation of substantial public policy Cross-Defendants terminated Park from his employment (¶43). Hurry, who is alleged to be the alter ego of the entity Cross-Defendants (¶30) is alleged to have pressed Park to make changes in the way he managed the business which Park refused to do because they were deceptive, unethical, and unlawful. In particular, it is alleged that Hurry insisted that Park charge every vehicle arriving for any type of repair work a flat fee of $150 and that he arbitrarily increased the charges for all repair work. FAXC, ¶25. At ¶41, Park alleges the reasons why this violates public policy by, including, citation to statutory provisions prohibiting false or misleading statements in written repair estimates, invoices, or records. He further alleges that an automobile repairer’s registration may be revoked for such conduct. Bus. & Prov. Code §9884.7. Glendale Hyundai’s demurrer argument that Park has failed to allege what law or public policy would be violated by charging a flat $150 fee to all customers seems to ignore this allegation. The demurrer is overruled.

3^rd Cause of Action – Breach of Fiduciary Duty

Elements: “ ‘The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.’ ” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086, 41 Cal.Rptr.2d 768; Knox v. Dean (2012) 205 Cal.App.4th 417, 432, 140 Cal.Rptr.3d 569.)” Williamson v. Brooks (2017) 7 Cal.App.5th 1294, 1300.

Allegations:

The FAXC alleges that Park had a 10% interest in Auto Holdings and Glendale Hyundai. FAXC, ¶¶8-10. Park alleges Cross-Defendants owed him fiduciary duties as a minority shareholder. Id. at ¶50. Detailed allegations of the conduct constituting breaches of fiduciary duty are contained in ¶51 and causation and damages are alleged in ¶¶ 52, 53.

Hyundai Glendale’s demurrer appears to ignore the allegation that Park is a minority shareholder in arguing that Park’s status as an employee does not give rise to any fiduciary duties. The demurrer is overruled.

4^th Cause of Action – Breach of Contractual Relations

Elements: “The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.

Allegations: Park alleges he was recognized as the Dealer Principal of the Hyundai store in a Dealer Sales and Service Agreement signed by Hyundai Motors of America (HMA). He further alleges that pursuant to this contract, Park was the dealer principal with full authority to make all decisions regarding the dealership and Hurry was an investor only. FAXC, ¶23. Despite this, Park alleges, Hurry began communicating directly with the dealers and pressing for more of a role, to which the dealers repeatedly responded that he was not qualified. Park alleges that after terminating his employment, Hurry tried to force the dealers to acknowledge him as the principal dealer but instead this resulted in HMA terminating the franchise agreement based on Hurry’ misconduct. Id. at ¶27. These allegations are repeated in the 4^th cause of action at ¶¶ 56-60. Paragraph 61 alleges that based on Cross-Defendants’ conduct, performance of the Hyundai Dealer Agreements was disrupted. Paragraph 62 alleges actual disruption and ¶¶63 and 64 allege resulting damages.

What is missing is an allegation that Park himself had a contract with HMA. The allegations seem to be that Hyundai Glendale had a franchise agreement with HMA and that the agreement recognized Park as the Dealer Principal. This cause of action is defective in that it essentially alleges that Glendale Hyundai interfered with a contract it had with HMA, of which Park was a third-party beneficiary. But a party cannot be liable for interfering with its own contract. PM Group v. Stewart (2007) 154 Cal.App.4th 55, 65. Demurrer is sustained.

5^th Cause of Action – Interference With Prospective Economic Advantage

Elements: “Intentional interference with prospective economic advantage has five elements: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action. (Citation.)” Roy Allen Slurry Seal, Inc. v. American Asphalt South (2017) 2 Cal.5th 505, 512.

Allegations: The allegations here are that Glendale Hyundai was approached by a buyer who offered $8 million to purchase the business, that Cross-Defendants refused the proposed asset purchase agreement, thereafter acted to dilute his interest in Auto Holdings and Glendale Hyundai, terminated his employment, and then entered into a renewed asset purchase agreement. Park alleges this resulted in him suffering a financial loss of $800,000 plus general damages. FAXC, ¶¶ 29, 68-75.

To the extent Glendale Hyundai argues the pleading fails to allege facts sufficient as to what it did, the demurrer is overruled based on the alter ego allegations at ¶30. The argument that Park is only an employee and lacks standing to sue is meritless; the pleading alleges his ownership interest in Auto Holdings and Glendale Hyundai. The demurrer is overruled.

6th Cause of Action – Violation of Labor Code §2802

Labor Code §2802 requires an employer to reimburse an employee for “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge or his or her duties.” Park alleges at ¶79 that Cross-Defendants denied reimbursement of business expenses incurred by Park as an employee of Glendale Hyundai and also unlawfully held Park accountable for business expenses by treating them as a distribution, thereby using the expenses to reduce payments to Park that would otherwise be due based on revenue generated by Glendale Hyundai.

While Park could have alleged more expansively that he incurred business expenses for which he was not reimbursed, the allegations are sufficient. The allegation that Glendale Hyundai treated the expenses by treating them as a distribution, thus reducing what he would have otherwise received, is a sufficient allegation that Glendale Hyundai was aware of the expenses and did not exercise due diligence towards reimbursement. The demurrer is overruled.

7th Cause of Action – Common Count

Park alleges here that after his termination he continued to work until the preliminary injunction was issued, including performing tasks at the request of Cross-Defendants, and that he has not been paid for such work. FAXC, ¶¶ 82-85.

These factual allegations are sufficient to constitute a common count. The argument that it is subject to demurrer on the same grounds as wrongful termination lacks merit as that cause of action survives. The demurrer is overruled.

8th Cause of Action – Accounting

Park alleges that after he was evicted from the premises pursuant to the preliminary injunction the parties have had a dispute about the profits and losses of the businesses and whether Park is owed any additional sums. He alleges that an accounting is appropriate based on the parties’ previous business relationship and the uncertainty generated by the competing claims for money in the complaint and cross-complaint. FAXC, ¶¶ 87-89.

These allegations are not uncertain. Based on the allegations, it appears that an accounting is appropriate. The demurrer is overruled.

9th Cause of Action – Theft of Property in Violation of Penal Code

Park alleges here that Cross-Defendants stole property consisting of money or funds from him in violation of Penal Code §§ 484, 496(a), 503, and 532. He further alleges the funds consist of deductions from revenue of Glendale Hyundai for false/fraudulent management fees, fraudulent charges for non-existent loans, diversion of funds owed to Park by fraudulently treating business expenses incurred as distributions, and misappropriation of funds owed to Park consisting of his right to monthly payments of 10% of profits.

Glendale Hyundai argues that Park has no standing to allege this claim of theft against it because as an employee, the property did not belong to him. This argument lacks merit as it ignores the allegations of ownership. The demurrer is overruled.

IV. CONCLUSION AND ORDER

Demurrer to the 4^th cause of action for interference with contractual relations is sustained on the basis that no cause of action is alleged where the contention is that a party has interfered with its own contract. As it does not appear this is a defect that could be cured by further amendment, leave to amend is denied.

Demurrer is otherwise overruled. Glendale Hyundai is granted 10 days to file an answer.

Dated: _______________________________

MARGARET OLDENDORF

JUDGE OF THE SUPERIOR COURT

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

NORTHEAST DISTRICT

HYUNDAI OF GLENDALE, LLC,

Plaintiff,

vs.

JAE PARK, and DOES 1 through 50, inclusive,

Defendants.

And related cross-action.

)

)
)

)

Case No.: 22GDCV00119

[TENTATIVE] ORDER DENYING CROSS-DEFENDANT AUTO HOLDINGS, LLC’S MOTION TO COMPEL ARBITRATION

Date: December 9, 2022

Time: 8:30 a.m.

Dept.: P

I. INTRODUCTION

Glendale Hyundai obtained a preliminary injunction prohibiting Park from returning to the property. Thereafter, Glendale Hyundai filed an amended pleading adding causes of action for breach of contract, breach of fiduciary duty, fraud, accounting, declaratory relief, intentional interference with contractual relations, and intentional interference with economic advantage. Park answered and filed a cross-complaint. The cross-complaint alleges claims not only against Glendale Hyundai but also against Auto Holdings, LLC (Auto Holdings) and John Hurry (Hurry), individually and as trustee of the Veicolo Trust and the Mama Bear Trust. Hurry responded by specially appearing to challenge service. Glendale Hyundai responded by demurring. Auto Holdings responded by way of the present motion which seeks an order compelling Park to arbitrate his claims against both Auto Holdings and Hurry.

Given the alleged interwovenness of the three Cross-Defendants and the potential for inconsistent rulings if the claims against Glendale Hyundai were to proceed separately from the claims against Auto Holdings and Hurry, the motion to compel arbitration is denied. Secondarily, the motion is denied on the grounds of unconscionability.

II. LEGAL STANDARD

Code Civ. Proc. §1281 provides: “A written agreement to submit to arbitration an existing controversy or a controversy thereafter existing is valid, enforceable, and irrevocable, save upon such grounds as exist for the revocation of any contract.”

Code Civ. Proc. §1281.2 provides that upon petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate and a party’s refusal to submit to arbitration, the court shall order the parties to arbitrate the controversy if it determines that an agreement exists, unless it determines that the right to arbitrate has been waived, that grounds exist for revocation, or that a party to the agreement is also party to a pending litigation arising out of the same facts and there exists a possibility of conflicting rulings on a common issue of fact or law. In such a situation, the court may (1) refuse to enforce the arbitration agreement and order intervention or joinder of all parties in a single action, (2) order intervention or joinder as to all or only certain issues, (3) order arbitration among the parties who have agreed to arbitration and stay the action pending outcome of arbitration, or (4) stay arbitration pending outcome of the litigation.

III. DISCUSSION

A. Summary of Pleadings

1. Glendale Hyundai v. Park

2. Park v. Glendale Hyundai, Auto Holdings, Hurry

Park alleges that at the same time he entered into the Auto Holdings Operating Agreement he entered into an Option Agreement with Glendale Hyundai for the right to purchase a 10% interest. Park alleges that he exercised that option as evidenced by a $500,000 Note which he paid in full, making him a 10% owner of Glendale Hyundai. FAXC, ¶¶8-10 and Exhibit 2 (Option Agreement). Park alleges that pursuant to this agreement he was entitled to 10% of Glendale Hyundai’s monthly revenue and that for years this was paid by “Hurry’s office personnel,” and further, that Hurry’s business also issued K-1 partnership reports showing Park’s ten percent ownership interest in both Glendale Hyundai and Auto Holdings.

B. Alter Ego Allegations

The FAXC contains alter ego allegations at ¶¶ 4 and 30.

C. Analysis of Arbitration Issue

1. Identification of Moving Parties

The caption of this motion indicates that Auto Holdings is the moving party. However, throughout the motion relief is sought on behalf of both Auto Holdings and Hurry. The Notice of Motion at 2:8-9 indicates that the what is sought is an order compelling arbitration of all claims “alleged against Auto Holdings and Cross-Defendant Mr. John Hurry Hurry [] for his alleged actions taken by and through Auto Holdings in his capacity as manager of Auto Holding’s sole managing entity and Board, Newmgt, LLC.” See also Memorandum of Points and Authorities at 5:1-2 ; 5:6; 9:17-18; 11:19-20; 12:21-24; 16:5-6; 17:25; 18:8-9; 18;14-16. The proposed order would require Park to arbitrate his claims against Auto Holdings and Hurry. And the pre-motion meet and confer letter also requests that Park agree to submit his claims against Auto Holdings and Hurry to arbitration. Declaration of Antonio K. Kizzie, ¶3 and Exhibit 4 thereto. Thus, despite Hurry’s protestations to the contrary in his reply on the motion to quash service of the summons and complaint, he makes a general appearance here through counsel in requesting that Park be compelled to arbitrate claims against him. Hurry would parse the language in this motion to say that what is sought is only arbitration of the claims against him in his capacity as Auto Holding’s manager. It is not clear how such a distinction helps as it is still a request for arbitration of claims against him.

2. Existence of and Terms of Arbitration Agreement

When a petition to compel arbitration is “filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.” Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.

Auto Holdings and Hurry present sufficient evidence to meet their burden to show the existence of a written agreement between the parties containing an arbitration provision. The Declaration of John Hurry is sufficient to authenticate the Auto Holdings Operating Agreement at Exhibit 2 to the Compendium of Exhibits. Section 12.6 of the Operating Agreement contains “Dispute Resolution” provision. It requires the parties to attempt mediation and if that fails, to arbitrate and dispute between them.

“12.6 Dispute Resolution.

(a) Mediation. In the event any parties to this Agreement are unable to resolve any dispute by mutual negotiation, controversy or claim arising out of or relating to this Agreement, or the breach thereof, (a ‘Dispute’), then either party may submit such Dispute to mandatory mediation conducted in Douglas County, Nevada (or such other location as the parties to such Dispute may agree) by a mutually agreed mediator. Each of the parties shall equally bear any mediation fees and administrative costs associated with the mediation.

(b) Arbitration. In the event the parties to a Dispute are unable to resolve such Dispute by mediation, such Dispute shall be settled by binding arbitration administered in Douglas County, Nevada in accordance with the American Arbitration Association's Commercial Arbitration Rules (the ‘Rules’). Each of the parties shall equally bear any arbitration fees and administrative costs associated with the arbitration. The prevailing party, as determined in arbitration, shall be awarded its costs, arbitration fees and administrative costs, and reasonable attorneys’ fees incurred in connection with the arbitration. Judgment on the award rendered in arbitration may be entered in any court having jurisdiction thereof.”

Park does not dispute the existence of this agreement. The scope of the agreement is broad as it extends to any dispute, controversy, or claim arising out of or relating to the agreement or any breach thereof.

3. Grounds for Revocation

Under both California and federal law, arbitration agreements are valid and enforceable except where grounds exist for revocation. Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 98. “Because unconscionability is a reason for refusing to enforce contracts generally, it is also a valid reason for refusing to enforce an arbitration agreement under Code of Civil Procedure section 1281.” Id. at 114.

Unconscionability has both a procedural and substantive element and both must be present but they need not be present in the same degree. Instead, a sliding scale is used. “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” Ibid.

a. Procedural Unconscionability

Park declares that he had no opportunity to negotiate the terms of the Operating Agreement and that instead they were presented to him by Hurry on a take-it-or-leave-it basis. Park Declaration, ¶3. Auto Holdings and Hurry object to most of the Park Declaration, including this short excerpt. The objection is to a larger piece of text and it is not perfectly clear whether the one sentence at issue is actually objected to. In any event, to the extent any of objections in Objection Number 1 (relevance, lack of foundation, speculation, hearsay) concern this sentence they are overruled.

While the level of sophistication between Park and Hurry is not known, nor are any details regarding the process by which the Operating Agreement came to be entered into, suffice it to say that this is not a typical situation where a person applies for employment and feels compelled to fill out whatever paperwork is required in order to accept an offer of employment. But even if it were, that alone is does not render it unconscionable. McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th76, 91; Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th1105, 1123; Serafin v. Balco Properties, Ltd., LLC (2015) 235 Cal.App.4th 165, 179.

In sum, at small amount of procedural unconscionability is shown.

b. Substantive Unconscionability

Park argues the agreement is substantively unconscionable for the following reasons: it requires him to share the costs and fees of arbitration; it exposes him to liability for Auto Holding’s attorney fees if it prevails; it contains a forum selection clause requiring him to arbitrate in a distant forum; Park’s Labor Code violation claims and wrongful termination claim are non-waivable may not be available in Nevada.

Beginning with the last point first, the parties disagree most strenuously about whether Auto Park need even be concerned about Park’s employment claims since the agreement it has with him is not an employment agreement. In response to Park’s unconscionability arguments based on his employment claims, moving parties reply that Park’s employment claims only “stand” as to Glendale Hyundai (Reply at 8:14-15) and that to the extent Park claims the arbitration terms are unfair he can dismiss his claims against Auto Holdings and just pursue his claims against Glendale Hyundai (Reply at 6:13-14). This argument disregards the allegations of alter ego liability and of agency. As there exists the possibility that Park will be able to establish that all Cross-Defendants were his employer, moving parties cannot avoid dealing with the Labor Code arguments.

Labor Code §925 prohibits an employer from requiring an employee who primarily lives and works in California to, as a condition of employment, agree to a provision requiring adjudication outside of California. Because the Auto Holdings Operating Agreement, which contains the arbitration provision, is not an employment agreement, this statutory provision would only apply if Park were able to establish that signing the Auto Holdings agreement was a condition of his employment. The two agreements are dated September 30, 2016, and work in tandem, as Auto Holdings it the sole owner of Glendale Hyundai, which employed Park. Labor Code §925 also prohibits an employer from depriving an employee of the substantive protections of California law with respect to a controversy arising in California. Again, to the extent Park is able to establish that moving parties Auto Holdings and Hurry employed him, this section applies.

In arguing that being forced to arbitrate in a distant land is unconscionable, Park relies on cases that do not necessarily help him. Bolter v. Superior Court (2001) 87 Cal. App. 4th 900, 909-910 found an arbitration agreement requiring franchises to arbitrate their claims out of state was unconscionable because it violated Bus. & Proc. Code §20040.5, which prohibits the inclusion of such a term in a franchise agreement. Nagrampa v. Mai/coups, Inc. (9th Cir. 2006) 469 F.3d 1257, 1289, is distinguishable on the same basis. The arbitration agreement in Pinedo v. Premium Tobacco Stores, Inc. (2000) 85 Cal. App. 4th 4 774, 781, was unconscionable for multiple reasons: it limits the amount the employee may recover for unpaid wages, it precludes recover under the FEHA, it requires the entire cost of arbitration to be borne by the employee, and it required the employee to arbitrate in Oakland. Nevertheless, the requirement that Park be required to arbitrate his claims in a state where he does not reside is slightly unconscionable. More importantly, to the extent arbitration in Nevada would cause Park to waive certain Labor Code protections he would have in California, it is unconscionable. Moving parties argue that any unconscionable term can be severed, but they do not offer to sever this term.

The most serious of Park’s arguments is that some of his employment claims are not actionable in Nevada. He cites, for example, his claim for wrongful termination in violation of public policy (which cites and relies in part on Labor Code §1102.5) and his claim for reimbursement under Labor Code 2800. One of Park’s central employment related claims concerns reimbursement. He is correct that such claim is non-waivable. Edwards v. Arthur 18 Andersen LLP (2008) 44 Cal.4th 937, 952; Hoover v. American Income Life Insurance Co. (2012) 19 206 Cal.App.4th 1193, 1208.

As for the argument that the terms requiring the cost of arbitration to be shared and providing for an award of attorney fees to the prevailing party, moving parties respond by pointing out that Park is not the same as a powerless employee; he is also a part owner. There is some merit to this. Park is different from the employees in many of the cases he relies on. He is not, for example, an hourly employee suing an employer as in Subcontracting Concepts (CT), LLC v. De Melo (2019) 34 Cal.App.5th 201, where a provision requiring the parties to share the cost of arbitration was found to be unconscionable because it imposed an expense on the employee he would not have had to bear while suing in court. Nevertheless, he does allege a claim under Labor Code §1102.5, subsection (j) of which provides for an award of attorney fees to a successful plaintiff.

Park relies on Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, a case explaining why a term permitting the prevailing party to recover its fees violates FEHA’s provision which only permits employees to recover fees in support of his unconscionability argument. This supports his substantive unconscionability argument.

c. Conclusion on Unconscionability

Parks has shown slight procedural unconscionability. He has also shown some substantive unconscionability in that requiring him to arbitrate in Nevada would require him to waive some unwaivable rights under the Labor Code. If the unconscionable provisions could be severed, the agreement could be enforced as procedural unconscionability is so slight. But here, there is no way to sever the unconscionable term unless the language requiring arbitration to occur in Nevada were excised. That would seem to gut the arbitration provision. For that reason, the Court finds that the arbitration provision is unconscionable.

4. Waiver

Parks argues that Auto Holdings has waived the right to arbitrate by interjecting itself into the litigation from the beginning. This argument has some appeal, especially in light of the fact that Auto Holdings, through Hurry, provided declarations in support of Glendale Hyundai’s request for preliminary injunction. However, there is no need to reach the merits of this argument as the arbitration agreement is unconscionable.

5. Potential For Conflicting Rulings

Park argues only briefly that the Court should deny this motion because if his claims against moving parties are arbitrated in one forum while his claims against Glendale Hyundai are tried here, the result could be inconsistent rulings. Here, the possibility of that occurring is especially acute given the alter ego and agency theories of liability. Moving parties fail to address this argument at all in their Reply.

Although given scant attention by the parties, the Court considers this to be the strongest reason for denying the motion. As Park points out in his opposition, trial courts are empowered to exercise their discretion and to deny arbitration where the possibility of conflicting rulings exists. Code Civ. Proc. §1281.2(c); Birl v. Heritage Care, LLC (2009) 172 Cal.App.4th 1313, 1319. Such a circumstance exists here.

Park’s claims against Cross-Defendants are intertwined. A real possibility exists that the trier of fact could reach one conclusion on the alter ego theory and the arbitrator another. To avoid such a scenario, the Court could grant moving parties’ request for arbitration but stay arbitration pending the conclusion of this action. The difficulty there is that Park would go about attempting to establish alter ego liability in this action and moving parties, since they are not participating, would not be able to defend the claim. The only way to avoid either of these undesirable outcomes is to deny the motion to compel arbitration.

IV. CONCLUSION AND ORDER

The motion by Auto Holdings seeks relief on behalf of both itself and Hurry. For that reason, this order has referred to them both as moving parties. The request for arbitration is denied primarily on the basis that Park is a party both to this litigation with Glendale Hyundai and the proposed arbitration as to his claims against Auto Holdings and Hurry, which could result in conflicting rulings if the arbitration provision were enforced. Thus, pursuant to Code Civ. Proc. §1281.2(c), the motion is denied. Secondarily, Park has shown the agreement to be unconscionable and therefore revocable.

The motion to compel arbitration is denied.

Dated: _______________________________

MARGARET OLDENDORF

JUDGE OF THE SUPERIOR COURT

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

NORTHEAST DISTRICT

HYUNDAI OF GLENDALE, LLC,

Plaintiff,

vs.

JAE PARK, and DOES 1 through 50, inclusive,

Defendants.

And related cross-action.

)

)
)

)

Case No.: 22GDCV00119

[TENTATIVE] ORDER DENYING CROSS-DEFENDANT JOHN HURRY’S MOTION TO QUASH SERVICE OF THE SUMMONS AND COMPLAINT

Date: December 9, 2022

Time: 8:30 a.m.

Dept.: P

I. INTRODUCTION

Glendale Hyundai obtained a preliminary injunction prohibiting Park from returning to the property. Thereafter, Glendale Hyundai filed an amended pleading adding causes of action for breach of contract, breach of fiduciary duty, fraud, accounting, declaratory relief, intentional interference with contractual relations, and intentional interference with economic advantage. Park answered and filed a cross-complaint. The cross-complaint alleges claims not only against Glendale Hyundai but also against Auto Holdings, LLC (Auto Holdings) and John Hurry (Hurry), individually and as trustee of the Veicolo Trust and the Mama Bear Trust. Glendale Hyundai demurred to the pleading. Auto Holdings sought an order compelling Park to arbitrate his claims against both Auto Holdings and Hurry. Hurry seeks an order quashing service of the summons and complaint. This present order concerns this last request. Because the Court finds both that service was adequate and that Hurry made a general appearance, the motion to quash is denied.

II. LEGAL STANDARD

Code Civ. Proc. §418.10(a) provides that a defendant, on or before the last day to plead, may serve and file a notice of motion to quash service of the summons on the ground of lack of jurisdiction.

Code Civ. Proc. §415.40 provides: “A summons may be served on a person outside this state in any manner provided by this article or by sending a copy of the summons and of the complaint to the person to be served by first-class mail, postage prepaid, requiring a return receipt. Service of a summons by this form of mail is deemed complete on the 10th day after such mailing.”

III. DISCUSSION

This motion to quash is being heard concurrently with three other motions. A more complete factual summary is contained in the demurrer order and the order denying arbitration. For purposes of the present motion, a very brief summary of the pleading suffices.

Park sues Hurry both individually and in his capacity as trustee of the Viecolo Trust and the Mama Bear Trust. Hurry, individually or as trustee of these two trusts, was the signor on the documents underlying the complaint and cross-complaint. Further, Park alleges that all cross-defendants were agents of one another and that the entity cross-defendants are alter egos of Hurry.

A. Evidence

Park served Hurry by certified mail in Arizona. The following evidence is offered as to whether such service was valid.

John Hurry states that it is his understanding Park “attempted” to serve him via mail that was sent to Scottsdale Capital Advisors located at 7170 E. McDonald Drive, Suite 6, Scottsdale, Arizona, 85253. Hurry declares that he is a Nevada resident and that in his capacity as trustee of the trusts he is aware that both are Nevada-based trusts, “founded under and subject to the jurisdiction of Nevada.” Finally, Hurry avers that Scottsdale Capital Advisors is not his usual mailing address, usual place of abode, or regular place of business for either trust. He avers it is a regulated Broker Dealer Business only. And he declares that the persons served are not members of his household, are not in charge of his personal affairs or related to either trust, and were not authorized to accept service on his behalf. Hurry Declaration, ¶¶ 2-4.

Park raises no objections to this evidence.

In opposition, Park offers his own declaration. His declaration includes the following averments:

¶2 – during the time he worked for Auto Holdings and Glendale Hyundai (2016 to May 2022) Hurry operated all of his business from his office in Arizona and also sent communications on behalf of the trusts from that office; Hurry physically worked at this office as well;

¶3 – the address of Hurry’s business office in Arizona is 7170 E. McDonald Dr. #6, Scottsdale, Arizona, 85253; Park routinely communicated with CFO’s Hurry hired relating to the businesses at issue here and who worked out of that office; Hurry’s wife Justine worked from the Scottsdale address as well, as did other employees; Justine is associated with the Mama Bear Trust and Hurry told Park the trust was created to benefit her;

¶4 – I routinely corresponded with Hurry regarding business matters relating to Auto Holdings and Glendale Hyundai at the Scottsdale office and my mail was always accepted by employees there;

¶5 – Hurry represented that he managed Auto Holdings and Glendale Hyundai through Mama Bear Trust and Newmgmt, LLC; true and correct copies of corporate resolutions provided to me by Hurry are attached at Exhibit 1 and state that Mama Bear was the manager of Auto Holdings (by way of being a manager of Newmgmt, LLC); Viecolo was managed in a similar manner;

¶6 – attached as Exhibit 2 is a copy of a letter I directed to Hurry at the Scottsdale office concerning an offer to purchase Auto Holdings; the letter reflects that Hurry did business from this office, including Auto Holdings business; I visited the Scottsdale office and personally witnessed Hurry’s employees working on behalf of the businesses Hurry operated, including Auto Holdings and Glendale Hyundai; at Exhibit 3 are copies of Bank of America documents for the corporate accounts reflecting the Scottsdale address;

¶7 – while I was manager of Glendale Hyundai I regularly sent reports to Auto Holdings and Hurry; attached at Exhibit 4 are emails showing these exchanges with the business and reflecting the Scottsdale address; the CFO had a phone number with a Scottsdale area code; Cheri Lane, an accountant, worked out of the Scottsdale office; Vance Ownbey and Brian Rowland, also accountants, also worked out of the Scottsdale office;

¶8 – on one occasion I visited the Scottsdale office; I observed the signage indicating that Hurry’s securities business had an office at this location but also a sign indicating that Auto Holdings had an office there as well; while there, I interacted with some of the employees referenced above, who at all times were acting on behalf of Hurry’s business from the Scottsdale office, and his trusts;

¶9 – I understand that Hurry says he lives in Nevada but Hurry repeatedly told me that this is just a vacation home and that he did not spend much time there.

Hurry raised numerous objections. Those objections are sustained in part and overruled in part, as follows: Objection #1 is sustained as to Hurry physically working at the Scottsdale location (lack of foundation) and is otherwise overruled; Objection #2 is sustained as to the statement that Justin Hurry worked out of the Scottsdale office (lack of foundation) and as to the statement that the Mama Bear Trust was created to benefit Justine Hurry (hearsay) and is otherwise overruled; Objection #3 is overruled; Objection #4 is overruled; Objection #5 is overruled; Objection #6 is overruled; Objection #7 is overruled; Objection #8 is overruled; Objection # 9 is sustained as to the statement that Hurry told Park his Nevada home is only a vacation home (hearsay) and is otherwise overruled.

The Declaration of Stephen M. Harris attaches as Exhibit 3 copies of the three signed acknowledgements of receipt for the three copies of the summons and complaint served at the Scottsdale address. [The Court notes that three separate summonses were issued for John Hurry, John Hurry on behalf of the Mama Bear Trust, and John Hurry on behalf of the Viecolo Trust.] Hurry does not object to this evidence.

B. Analysis

The argument Hurry makes in this motion is that, although Code Civ. Proc. §415.40 permits service outside this state by sending a copy of the summons and complaint via first-class mail, return receipt requested, service was ineffective because the summons and complaint were mailed to the wrong address. Memorandum of Points and Authorities at 6:23. Hurry’s reliance on Evidence Code §641 does not assist him as that section concerns an evidentiary presumption of a letter’s receipt. Here, there is no question but that the mail was received. It was signed for.

Hurry also raises the argument that service was ineffective because the Scottsdale address is not his usual mailing address, usual place of abode, or regular place of business for either trust. This argument borrows from Code Civ. Proc. §415.20, which governs substituted service. Hurry cites no case authority for imposing the “usual place of abode” requirement on service under Section 415.40. He quotes the 2015 Judicial Council Comment to this section as saying that this section “requires the documents to be sent ‘to the person on whom service is desired, generally at his place of residence.’ See Judicial Council of Cal., reprinted at Deering’s Ann. Code Civ. Proc. (2015 ed.) foll. § 415.40, p. 461, italics added.” That comment is not contained in the current version of the Code but even if it were, it falls short of mandating mail to a party’s place of residence. Such language is simply not in the statute and the Court declines to read it in.

The evidence provided is more than sufficient to demonstrate that Hurry regularly conducts business at the Scottsdale address, including business transactions at the heart of this litigation. Park previously engaged in correspondence with Hurry regarding the businesses via the Scottsdale address. Hurry urges that even if it is shown his businesses receive mail there this does not establish that he or the trusts he represents do so. This is a repeat of the argument importing the requirements for substituted service. All that is required under Section 415.40 is service by certified mail. Whether or not the Scottsdale address was Hurry’s usual place of abode, or the place the trusts usually receive mail, it is clearly a valid mailing address for Hurry.

It is unrefuted that the certified mail was signed for at the address. Hurry does not protest that the mail was improperly signed for, meaning that the employee was not authorized to sign for mail addressed to him. His only objection is that the person was not authorized to accept service of a summons and complaint on his behalf. However, as Park notes, this is not a requirement. Pursuant to Neadeau v. Foster (1982) 129 Cal.App.3d 234, all that is required is that the person is authorized to receive mail on his behalf, not that the person be authorized to accept service. Hurry provides no evidence purporting to establish that the letter was not properly signed for.

Separate and apart from the sufficiency of mail service here, Park makes a persuasive argument that Hurry has made a general appearance. As explained more fully in the companion arbitration motion, by seeking affirmative relief he has made a general appearance.

IV. CONCLUSION AND ORDER

Hurry’s motion to quash service of the summons and complaint is denied.

Dated: _______________________________

MARGARET OLDENDORF

JUDGE OF THE SUPERIOR COURT

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

NORTHEAST DISTRICT

HYUNDAI OF GLENDALE, LLC,

Plaintiff,

vs.

JAE PARK, and DOES 1 through 50, inclusive,

Defendants.

And related cross-action.

)

)
)

)

Case No.: 22GDCV00119

[TENTATIVE] ORDER GRANTING PLAINTIFF’S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

Date: December 9, 2022

Time: 8:30 a.m.

Dept.: P

I. INTRODUCTION

Glendale Hyundai now seeks leave to file a Second Amended Complaint. For the reasons that follow, the motion is granted.

II. LEGAL STANDARD

Code Civ. Proc. §473(a) allows courts to permit amendment of pleadings in furtherance of justice and on any terms as may be proper.

Judicial policy strongly favors amendment. The general rule is liberal construction of pleadings and liberal allowance of amendments. Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939.

Cal. Rules of Court, Rule 3.1324(b) requires that a motion for leave to amend be accompanied by a declaration stating why the amendment is necessary and proper, when the facts giving rise to the amended declaration were discovered, and the reason why the request for amendment was not made earlier.

III. DISCUSSION

Glendale Hyundai seeks leave to amend its complaint to add a cause of action for theft under Penal Code §496(a), adding language about Park breaching his fiduciary duties, and adding a prayer for the recovery of attorney fees. The Declaration of Antonio Kizzie offered in support of the motion, while somewhat slim in detail about when facts giving rise to the amendment were discovered, is sufficient to meet the requirements of Rule 3.1324. He states generally that facts were discovered during discovery conducted in early to mid-2022 and on-going forensic accounting and investigation, and that leave to amend was not sought earlier because additional time was needed to research, analyze, and strategize.

Park strenuously opposes the motion, urging that Glendale Hyundai has not acted with diligence and that he will be prejudiced by the addition of the new claims. This argument rests in part on his contention that Glendale Hyundai has not been forthcoming in responding to discovery as to claims it has already alleged against him. Park urges the Court, if it is inclined to grant relief, to make it contingent upon Glendale Hyundai providing substantive responses to discovery. The Court declines to do so. If there is a need for judicial intervention in discovery, relief may be sought by separate motion. The parties are encouraged to request an Informal Discovery Conference if it is believed this would be beneficial. As for the delay argument, while perhaps this relief should have been sought sooner, Plaintiff has not established prejudicial delay. Ample time remains to prepare for trial.

Park urges that the proposed 9^th cause of action for theft is defective and relief should be denied on that basis, citing Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 231. Pursuant to that authority, relief may be denied where a proposed pleading is fatally defective such as where it is barred by the statute of limitations. That is not the case here. Park argues only that the pleading fails to allege sufficient facts.

IV. CONCLUSION AND ORDER

Plaintiff’s motion for leave to amend is granted. Plaintiff is granted five days to file the proposed Second Amended Complaint.

Dated: _______________________________

MARGARET OLDENDORF JUDGE OF THE SUPERIOR COURT