Judge: Mark A. Young, Case: 21SMCV00716, Date: 2023-03-09 Tentative Ruling
Case Number: 21SMCV00716 Hearing Date: March 9, 2023 Dept: M
CASE NAME: SMC Specialty
Finance LLC, v. Sanping, et al.
CASE NO.: 21SMCV00716
MOTION: Motion
to Strike
HEARING DATE: 3/9/2023
BACKGROUND
In April 2021, Plaintiff SMC Specialty
Finance, LLC filed this declaratory relief/breach of contract suit against
Defendants Han Sangping, Alex Zhang, Zhengfu Pictures Ltd.,
Beijing Zhumeng Qiming Culture & Art. Co., Ltd., Golden Title Investments
Ltd. The suit arises from financing and distribution agreements for World War
II films, Greyhound and Destroyer.
Relevantly, the Court previously
considered a preliminary injunction request by Cross-Complainants. Zhengfu
sought to enjoin SMC from engaging in specified activities, including
interfering with Zhengfu’s contractual rights by communicating with third
parties or taking any acts to interfere with or prevent Zhengfu’s rights to
obtain, possess and exercise its right to distribute the Greyhound
motion picture in China. The Court issued a written order denying Zhengfu’s
request for a preliminary injunction. In denying this relief, the court
reasoned that Zhengfu had not demonstrated that it was likely to prevail on the
merits of its cross-complaint because Zhengfu had “not shown that the
[Greyhound Agreement] prohibited” the grant of its security interest to SMC
Specialty and because the balance of harms favored SMC Specialty, as Zhengfu
was in no danger of imminent harm given that “SMC [Specialty] has . . . done
nothing [to distribute Greyhound or otherwise seek to collect Zhengfu’s
revenues under the Greyhound Agreement] since foreclosing on the security
interest.” The Court’s denial of the injunction was affirmed in an unpublished
Court of Appeal opinion.
Cross-Complainants Zhengfu Pictures Ltd., Beijing Zhumeng
Qiming Culture & Art Co. Ltd.’s operative Second Amended Cross-Complaint
alleges nine causes of action against SMC including intentional interference
causes, conversion, fraud-based causes, unlawful competition (§17200), and
declaratory relief. Cross-Defendant SMC moves to strike certain portions of the
SACC.
Legal
Standard
Any party, within the time allowed
to respond to a pleading may serve and file a notice of motion to strike the
whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule
3.1322(b).) The court may, upon a motion or at any time in its discretion and
upon terms it deems proper: (1) strike out any irrelevant, false, or improper
matter inserted in any pleading; or (2) strike out all or any part of any
pleading not drawn or filed in conformity with the laws of California, a court
rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a
pleading which is not essential to the claim is surplusage; probative facts are
surplusage and may be stricken out or disregarded”].)
“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.)
Analysis
Assignment Clauses of the Co-Financing Agreement
Cross-Defendant SMC moves to strike
allegations relating to the “Anti-Assignment Clauses” of the Greyhound
Co-Financing agreement. (SACC pp. 3:9-15; 8:7-26; 9:1-8, 12-13 and 14:17-24);
and the Midway Co-Financing Agreement (SACC pp. 11:20-12:3; 12:7-9 and
14:25-27).
The SACC contains multiple references to the
anti-assignment clauses of the Financing Agreements between Zhengfu and SPWA.
SMC contends that these allegations are irrelevant to the instant dispute
because the “actual” claims challenge the legitimacy of a pledge of collateral,
not an assignment of rights. This Court, and the Court of Appeal, already ruled
that the anti-assignment provisions would not apply to a pledge of
collateral. SMC reasons that because this issue was resolved, the SACC’s
allegations referencing the anti-assignment clause should be stricken.
First, the Court must note that the
ruling on the preliminary injunction would not suggest these allegations must
be stricken. As SMC observes, generally, a trial court or appellate ruling on
preliminary injunction are not final adjudications that bind the trial
court. (Jomicra, Inc. v. Cal. Mobile Home Dealers Assn (1970), 12
Cal.App.3d 396, 402.) While the Court of Appeal, and this Court both agree that
the contract language would not bar the pledges of collateral,
this issue is not broached by the targeted allegations. The targeted
allegations reference the anti-assignment clause (which does exist) and
makes allegations concerning assignments. The SACC characterization of
these as assignments is a matter of fact. Looking closely at the targeted
allegations, they do not discuss pledges of collateral. The Court would have to
look beyond the pleadings at extrinsic evidence to conclude that the pled
assignments are, in fact, pledges of collateral. Thus, liberally construed, the
targeted allegations do not strictly contradict any holding in this action. Accordingly,
the Court is hard-pressed to describe the allegations as “irrelevant, false, or
improper” at the pleading stage.
As such, the motion to strike is
DENIED as to these allegations.
Copyright
SMC moves to strike any mention of
the idea of copyrights pertaining to the subject films. (SACC pp. 7:13-15;
24:1-2; 31:9-10 and 41:11-12.) While the Court did dismiss the Copyright Act
claim, this does not mean that any allegations pertaining to copyrights would
be “irrelevant, false or improper” under the motion to strike standard. Simply
put, the factual allegations concerning the copyright do not require
this court to rule on a Copyright Act claim. Cross-Complainants are simply
referring to property rights as a matter of fact that indisputably relate to the
dispute at hand. Accordingly, Cross-Defendant’s motion to strike is DENIED as
to these allegations.
Damages Under UCL
The SACC alleges that as a direct
and proximate result of Cross-Defendants’ unfair business practices, Zhengfu
and Zhumeng suffered and will continue to suffer damages in an amount to be
proven at trial. (SACC p. 42:8-9.) As recognized by Cross-Complainants, Section
17200 only allows for restitution, but not damages. (Bus. & Prof. Code §
17203.) As such, the improper reference to damages in connection with the
section 17200 claim should be stricken.
Accordingly, Cross-Defendant’s
motion is GRANTED as to this item, without leave to amend.