Judge: Mark A. Young, Case: 20SMCV01720, Date: 2024-04-02 Tentative Ruling
Case Number: 20SMCV01720 Hearing Date: April 2, 2024 Dept: M
CASE NAME: Trinity Media
Financing Int’l Ltd., v. Every Breath LLC, et al.
CASE NO.: 20SMCV01720
MOTION: Demurrer
to the First Amended Cross-Complaint
Motion for Judgment on the Pleadings
HEARING DATE: 4/2/2024 and 4/3/2024
Legal
Standard
Demurrer
A
demurrer for sufficiency tests whether the complaint states a cause of action.
(Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context. In a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co.
(2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not
the evidence or other extrinsic matters. Therefore, it lies only where the
defects appear on the face of the pleading or are judicially noticed. (CCP §§
430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate
facts sufficient to apprise the defendant of the factual basis for the claim
against him. (Semole v. Sansoucie
(1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit
contentions, deductions or conclusions of fact or law alleged in the pleading,
or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen
(1964) 226 Cal.App.2d 725, 732, internal citations omitted.)
“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.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
Motion
for Judgment on the Pleadings
A
defendant’s motion for judgment on the pleadings may be made after the time to
demur has expired and an answer has been filed. (CCP § 438(f).) A motion by a
defendant may be made on the grounds that (1) the court “lacks jurisdiction of
the subject of one or more of the causes of action alleged” or (2) the complaint
or cross-complaint “does not state facts sufficient to constitute a cause of action
against that defendant.” (CCP § 438(c).)
A motion
for judgment on the pleadings has the same function as a general demurrer but
is made after the time for demurrer has expired. Except as provided by statute,
the rules governing demurrers apply. (Cloud v. Northrop Grumman Corp.
(1998) 67 Cal.App.4th 995, 999.) “A motion for judgment on the pleadings is
akin to a general demurrer; it tests the sufficiency of the complaint to state
a cause of action. The court must assume the truth of all factual allegations
in the complaint, along with matters subject to judicial notice.” (Wise v.
Pacific Gas and Elec. Co. (2005) 132 Cal.App.4th 725, 738, citations
omitted.) Further, like a general demurrer, a motion for judgment on the
pleadings “does not lie as to a portion of a cause of action, and if any part
of a cause of action is properly pleaded, the [motion] will be overruled.” (Fire
Ins. Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.)
REQUEST FOR JUDICIAL NOTICE (MJOP)
Defendants/Cross-Complainants’ request for judicial notice with respect
to the motion for judgment on the pleadings is GRANTED. (Evid. Code § 452(d).
Analysis
Demurrer
On October 26, 2023, Cross-Defendant Morgan Emmery filed a notice of
demurrer to the First Amended Cross-Complaint’s (FACC) causes of action for contract interference
and fraud. The Court is in receipt of the notice of demurrer, declarations in
support of the demurrer, request for judicial notice, and proof of service of
the demurrer. However, there is no memorandum in support of the demurrer on the
record. While that is grounds to deny the demurrer, the Court will consider the
motion based upon the issues presented in the opposition and reply papers.
Intentional Interference
Emmery is generally correct that a party to an agreement cannot interfere
with its own contract. The elements for a
cause of action for intentional interference with contractual relations are as
follows: (1) plaintiff had a valid and existing contract with a third party;
(2) defendant had knowledge of the contract; (3) defendant committed intentional
and unjustified acts designed to interfere with or disrupt the contract; (4)
actual interference with or disruption of the relationship; and (5) resulting
damages. (Davis v. Nadrich (2009) 174 Cal.App.4th 1, 10.) Only “a stranger to a contract may be liable
in tort for intentionally interfering with the performance of the contract.” (Pacific
Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118,
1126; see Applied Engineering Corp. v. Litton Saudi Arabia Ltd. (1994) 7
Cal.4th 503, 514.)
Here, Emmery was allegedly acting on behalf
of Trinity as its President and Chief Executive Officer. (FACC ¶¶ 6, 8.)
Emery executed/agreed-to the subject
agreements on behalf of Trinity, including the initial financing proposal, the
terms of the holdback agreements via email and the second financing proposal. (FACC
¶¶ 12, 18, 22, 60.) The Court agrees
that, under such facts, Emmery cannot be liable for interfering with his
principal’s own contracts where all his actions were allegedly on behalf of
Trinity, since Trinity is not a stranger to the financing and holdback
agreements. However, the FACC also alleges that Emmery interfered with
agreements to which Trinity was not a party.
The
FACC notes several other third-party contracts, including the Story Mining
Agreement (FACC ¶15), the WGA writing payments due to Jerou and Lewis (¶ 36),
the guild bond closing obligations (Id.), and the producer agreement between
Southpaw and Every Breath. (¶¶ 13, 30, 36.) Emmery and Trinity were allegedly
aware of all these agreements. (FAC ¶ 53.) Emmery withheld the holdback
payments, in breach of the holdback agreements. (FAC ¶ 54.) Through this
conduct, Emmery intended to disrupt or prevent performance by
Cross-Complainants of the third-party agreements, and indeed prevented and
disrupted such performance. (FAC ¶¶ 33-37, 55-56.) Thus, the claim includes
third party agreements and is well-pled against Emmery as to these agreements. Since
a demurrer may only attack an entire cause of action, the demurrer is
OVERRULED. (See Fire Ins. Exchange, supra, 116
Cal.App.4th at 452 [the court must overrule a demurrer if any part of a cause
of action is properly pleaded].).
Fraud
The elements of fraud are: “(a)
misrepresentation (false representation, concealment, or nondisclosure); (b)
knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce
reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v.
Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including
negligent misrepresentation, must be pled with specificity. (Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands
that a plaintiff plead facts which show how, when, where, to whom, and by what
means the representations were tendered.” (Cansino v. Bank of America
(2014) 224 Cal.App.4th 1462, 1469.) “Fraud in the inducement . . . occurs when ‘the promisor knows what he is
signing but his consent is induced by fraud, mutual assent is present and a
contract is formed, which, by reason of the fraud is voidable.” (Rosenthal
v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 415; see
Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [“An action for
promissory fraud may lie where a defendant fraudulently induces the plaintiff
to enter into a contract”].)
The FACC establishes Emmery’s alleged fraud with specificity. Emmery fraudulently
induced Lewis and Cross-Complainants to enter into the Holdback Agreement for
the express purpose of obtaining, among other things, Lewis’ expertise in the motion
picture industry and his production services, as well as a holdback of Lewis’ compensation
and costs as set forth herein to reduce the Picture’s budget in furtherance of procuring
a bond from FFI. (FACC ¶¶ 16-27, 60.) Once it became clear that the film was
struggling to make expected sales, Trinity began demanding that Lewis and Jerou
take holdback positions on the unpaid balance of their producer fees, and defer
the majority of their contractual writing fees and bonuses in order to meet
Trinity’s new, reduced budget for the Picture. (¶ 16.) In a series of emails
from Emmery to the other producers, including Lewis, Jerou, Levy, Buchs and
others, from November 27 through December 17, Emmery made specific
representations regrading the terms of certain Holdback Agreements. (¶¶ 18-27.)
Each of the representations included the material term that after the project
reached $2.5 million in sales the holdbacks would be released. (Ibid.) These
terms establish that Emmery made specific misrepresentations via written emails
on specific dates regarding the holdback terms.
The FACC alleges that Emmery made these false promises in order to
convince Cross-Complainants to: (i) enter into the Holdback Agreement; (ii)
enter into the Letter Agreement; (iii) devote writer, development, and
production services for the Picture; and (iv) to contribute physical and
financial resources to the Picture. (FACC ¶ 61.) Emmery knew that even if
Cross-Complainants complied with their obligations under the agreements,
Cross-Defendants would still not release the holdbacks. (¶ 62.) In fact, in May
2020, the parties obtained an agreement for a “back stop” US distribution deal
for $1.5 million, which in combination with the approximately $1.36 million in
presales secured, put the total presales over the $2.5 million threshold
thereby triggering the release of the holdbacks under the holdback agreements.
(¶ 33.) Aside from the failure to abide by the terms of the holdback
agreements, Cross-Defendants incorrectly placed the recoupment of holdback fees
after the recoupment of investments by other financiers in their May 18, 2020,
proposed waterfall schedule. (¶ 62.) Further, Cross-Defendants have completely disavowed
the Holdback Agreements. (Ibid.) Cross-Complainants reasonably relied on these
representations and was thereby induced to enter into the Holdback Agreements
and the Letter Agreement to their detriment. (¶ 63.) As a result, they were
damaged. (¶ 66.)
Accordingly, the demurrer is OVERRULED.
Motion for
Judgment on the Pleadings
Plaintiff/Cross-Defendant Trinity
Media Financing International Limited also moves for judgment on the pleading
against the FACC’s third cause of action for Intentional Interference with
Contract. Trinity specifically requests a judgment against the interference
cause of action with respect to the “Letter Agreement,” certain “Oral Holdback
Agreements,” and the December 4, 2019, “Proposal Agreement.” Cross-Defendant
argues that the cause of action fails to the extent that it relies on those
agreements because only “a stranger to
a contract may be liable in tort for intentionally interfering with the
performance of the contract.” (Pacific Gas & Electric Co. v. Bear
Stearns & Co. (1990) 50 Cal.3d 1118, 1126; see Applied Engineering
Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514.)
As with the demurrer, Trinity’s
motion cannot succeed because a demurrer or motion for judgment on the
pleadings can only attack an entire cause of action. (See Fire Ins. Exchange, supra, 116 Cal.App.4th at 452
[the court must overrule a demurrer if any part of a cause of action is
properly pleaded].) Trinity fails to show that the FACC only
relies on the cited first party contracts. Even if Trinity could not interfere
with the cited first party contracts because Trinity is a party to such
agreements, the interference cause of action also relies on other, third-party
agreements. Read liberally, Cross-Complainant alleges that Trintiy interfered
with certain guild agreements regarding the Picture and Southpaw’s producer
agreement with Every Breath. (FACC ¶¶ 13, 53-54.) Trinity admits in its motion
that it is not targeting the cause of action regarding the payments to Jerou
and Schenz. The third cause of action is therefore legally sufficient against
Trinity, even if Trinity is a party to some of the contracts alleged.
To the extent that these
allegations would be legally insufficient to support a claim for interference,
and would otherwise be irrelevant, Cross-Defendant could have brought a
motion to strike specific allegations as “irrelevant, false, or improper”
matters or allegations “not drawn or filed in conformity” with the Court’s
demurrer order. (CCP § 436.) However, Trinity has not filed such a motion.
Trinity has not identified which allegations should be stricken with
particularity, why such allegations would be irrelevant to this action, or why
the allegations are not in conformity with the court’s prior demurrer order
overruling the demurrer to the third cause of action. The Court must also note
that the cause of action is stated against “All Cross-Defendants,” not just
Trinity. Thus, the cause of action alleges that other parties, including doe
defendants, interfered with the Letter Agreement, Holdback agreement(s), and
the Proposal Agreement. Therefore, alleging that all “Cross-Defendants”
interfered with such agreements would not be improper, false, or irrelevant,
and would be filed in conformity with the Court’s March 15, 2022, order
overruling the prior demurrer. Therefore, Trinity would not succeed in striking
out the inclusion of such agreements in the third cause of action.
Accordingly, the motion is DENIED.