Judge: Mark A. Young, Case: 21SMCV00789, Date: 2023-03-03 Tentative Ruling



Case Number: 21SMCV00789    Hearing Date: March 3, 2023    Dept: M

CASE NAME:           Militello, et al., v. Vfarm1509, et al.

CASE NO.:                21SMCV00789

MOTION:                  Demurrer to the Third Amended Complaint

                                    Case Status Conference

HEARING DATE:   3/3/2023

 

Legal Standard

 

            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.)

 

            A special demurrer for uncertainty is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

 

            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.)

 

MEET AND CONFER

 

Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (CCP §§ 430.41, 435.5.) Counsel’s declaration regarding a single email sent to Plaintiff’s counsel does not satisfy Code of Civil Procedure § 430.41(a)’s requirement that the parties meet and confer in person or by telephone. (Ferrante-Alan Decl. ¶¶ 2-3.) In the past the parties have met this meet and confer requirement, and they are reminded to comply in the future. 

 

Dr. GAYTRI’s DEMURRER/MOTION TO STRIKE

 

Defendant Dr. Gaytri Manek demurs to the second and fifth causes of action, and moves to strike punitive damages.  Dr. Gaytri demurs against the causes of actions asserted against her on the grounds that the TAC fails to allege facts supporting her participation in the alleged conspiracy.

 

Dr. Gaytri’s Demurrer (Conspiracy/Aiding Abetting Liability)

 

“Liability may . . . be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person. [Citations.]” (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 846.) A defendant must have “actual knowledge of the specific primary wrong the defendant substantially assisted.” (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1145; see Am. Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal. App. 4th 1451, 1476 [liability attaches when the aider and abettor “behaves in a manner that enables the primary violator to commit the underlying tort.”].)

A civil conspiracy to commit an underlying tort has three elements: “(1) the formation and operation of the conspiracy, (2) wrongful conduct in furtherance of the conspiracy, and (3) damages arising from the wrongful conduct.” (Kidron v. Movie Acquisition Corp. (1995) 40 Cal. App. 4th 1571, 1581.) “To establish conspiracy, a plaintiff must allege that the defendant had knowledge of and agreed to both the objective and the course of action that resulted in the injury.” (IIG Wireless, Inc. v. Yi (2018) 22 Cal. App. 5th 630, 652.) A plaintiff must also allege that the defendant acted with intent to further the conspiracy; “actual knowledge of the planned tort, without more, is insufficient to serve as the basis for a conspiracy claim.” (Kidron, supra, 40 Cal. App. 4th at 1582.)  The Court previously ruled that Plaintiff needed to specifically allege Dr. Gaytri’s: 1) knowledge of the scheme; 2) intent to further such a conspiracy; and 3) sufficient facts showing her aiding/acting in furtherance of the conspiracy.

The TAC brings the following pertinent allegations concerning Gaytri’s knowledge, intent, and acts in furtherance.  The TAC alleges that Gaytri helped formulate and execute the alleged scheme. On January 24, 2020, Lawrence, Athey, Manek, and Gaytri, had a private meeting where they formulated a common scheme to squeeze out Militello for personal financial gain, and to shield their illicit accounting practices. (TAC ¶ 101) Gaytri had knowledge that Militello and Lawrence were partners in GBC, and that GBC was the party to the enforceable 20-Year Contracts with the Dispensaries. (¶¶102-104) Gaytri also had knowledge that Militello refused to sign-off on Lawrence and Manek’s underreporting and false expenses. Gaytri knew that her spouse needed Militello to believe that the contract would be cancelled by Manek if she did not agree to certain modifications. Gaytri knew the modifications would remove Militello’s access to financial information and control of the Dispensaries and force GBC to be liable for any payment of fees and penalties from her spouse’s illicit accounting practices. (Id.)

 

On February 6, 2020, during a meeting discussing the modifications, Gaytri demanded that Marcelo, who had been working at the LMP Property, to leave the room so that they could carry out the meeting, asked Militello for her reasoning behind dissolving GBC and told Militello that she should only concern herself with tasks that are on her list of specified duties, which Gaytri would finalize. (TAC ¶ 111.) After the Meeting, Gaytri “personally drafted amendments to Option A, which further limited Militello’s access to financial information and any control to access the information. Gaytri provided these amendments to Militello and Lawrence under the guise that Manek would be terminating GBC’s contracts if they were not accepted. Unbeknownst to Militello at the time, Gaytri worked on these amendments with Lawrence and Manek directly and then presented them to Militello on behalf of Manek… In these amendments, Gaytri explicitly included herself and Athey (in addition to Lawrence and Manek) as parties in the nondisparagement and penalty portion of GBC’s amended agreements in a misguided (but deliberate) attempt to shield herself from liability attendant to this conspiracy. Thereafter, Gaytri actively reached out to Militello and demanded to discuss the proposed amendments. During these communications, Gaytri reassured Militello that the 20-Year Contracts would be terminated by Manek if she did not agree to his proposed modifications. Gaytri actively represented to Militello that the amendments were being offered as a final, ‘take it or leave it’ chance for Militello to retain any source of income from the Dispensaries. Gaytri knew and understood that Militello would later be meeting with Lawrence and Manek to discuss January 2020 payments that had been withheld absent new contracts, and she used that knowledge to present the amendments to Militello at the most opportune time in an effort to maximize the chances of success of this conspiracy.” (¶ 112.)

 

“On February 10, 2020, after providing Militello with the amendments she drafted, Gaytri contacted Militello seeking confirmation from Militello that she would be able to follow the duties assigned to her and not concern herself with any matters on Lawrence’s list of duties (i.e., tax and financial reporting). Gaytri also informed Militello that she was also cutting the 20-year term (which was not in Option A as presented) and explained that this cut term was an additional modification that Manek required to continue working with GBC. At and before this time, Gaytri was aware that Lawrence and Militello were co-partners in GBC because Gaytri was drafting amendments to the contracts that governed GBC’s management of the Dispensaries and she broke down roles specific to each of Militello and Lawrence. At this time Gaytri was also aware that Lawrence was partaking in actions intended to terminate or adversely modify GBC’s 20-Year Contracts and that Militello was not aware of Lawrence’s intentions or their secret meetings.” (¶ 113.) Further, on February 17, 2020, “Gaytri called Militello and informed her that if she does not accept Manek’s proposed amendments, he would no longer be working with her and would cancel GBC’s contracts.” (¶ 121.)

 

The agreements were “designed to (i) materially reduce the contract term (which had approximately 18.75 years remaining) for the purpose of removing Militello sooner and then continuing the relationship with Lawrence under new contracts, (ii) create authority to immediately remove Militello’s management and operational control in the Dispensaries, including stripping Militello of access to past, present and future financials, and her authority to conduct business in or for the Dispensaries, and (iii) establish new payment terms with a retributory effect to directly and materially penalize Militello for any additional tax obligations incurred by the Dispensaries.” (¶ 129.)

 

Gaytri “actively participated in, agreed to, aided and abetted, conspired in, and/or furthered a fraudulent scheme to intentionally, willfully and knowingly make fraudulent misrepresentations of fact and fraudulently omitted and concealed material information to Militello as a part of their broader scheme to defraud Militello from ownership interests, financial interests, and/or management rights in Rose and Farmacy[.]” (¶ 225.)

 

These allegations specifically allege facts regarding Gaytri’s subjective knowledge and intent regarding the conspiracy, intent to further the conspiracy, and specific acts in furtherance of the conspiracy and which provided substantial assistance to the conspiracy. Gaytri asserts there is no factual basis to support these conclusions. However, at the demurrer stage, the TAC allegations are established as facts. Instead, Gaytri’s demurrer principally focuses on the lack of an evidentiary basis for these allegations. Gaytri contends that drafting the documents cannot be considered substantial assistance. Gaytri offers no persuasive authority that this could not be considered substantial assistance, and certainly no authority that as a matter of law they could not be sufficient. The fact (or allegation) that other participants in the alleged conspiracy also made changes or presented information related to the fraudulent scheme does not render Dr. Gaytri’s alleged participation less substantial or undermine the element of causation.

 

Accordingly, Dr. Gaytri’s demurrer is OVERRULED.

 

Motion to Strike Punitive Damages

 

            In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code Section 3294. (Coll. Hosp., Inc. v. Superior Ct. (1994) 8 Cal.4th 704, 721.) These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. (Civ. Code § 3294(a).)

 

            “In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff. [Citations.] In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth. [Citations.] In ruling on a motion to strike, courts do not read allegations in isolation. [Citation.]” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) “The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages. [Citation.] Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim. [Citation.]” (Grieves v. Superior Ct. (1984) 157 Cal.App.3d 159, 166, fn. omitted.)

 

“Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (Civ. Code § 3294(c)(3).)


            As discussed above, the TAC alleges that Dr. Gaytri participated in the deceit and concealment of material facts, of which she knew, with the intention of depriving Plaintiff of legal rights pertaining to the operation of their dispensary business.  This is sufficient for pleading purposes to support a claim of punitive damages on the basis of fraud.  Accordingly, the motion to strike is DENIED.

 

Defendant Dr. Gaytri to file an answer within ten days.

 

DISPENSARY DEFENDANTS’S DEMURRER

 

Defendants Ann Lawrence Athey (“Lawrence”), Rajesh Manek (“Manek”), VFARM1509 Inc. d/b/a Rose Collective (“Rose”), WFARM1045 Inc. d/b/a The Westwood Farmacy (“Farmacy”), Quantum Leap Enterprises LLC (“Quantum”), Rose Collective, Inc. (“Rose Collective”), Sunnyside Collective, Inc. (“Sunnyside Collective”), Highland Acquisitions LLC (“Highland”), and Lankershim Management Inc. (“Lankershim Inc.”) demur to the ninth cause of action for conversion and the eleventh causes of action.

 

9th Cause of Action:  Conversion

 

Defendants demur to the four counts contained within the conversion claim.  Conversion is “an act of dominion wrongfully exerted over another’s personal property in denial of or inconsistent with his rights therein.” (Oakes v. Suelynn Corp. (1972) 24 Cal.App.3d 271, 278.) The elements for conversion are: “(1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages....” (Hodges v. County of Placer (2019) 41 Cal.App.5th 537, 551.) “It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451-452.)   

 

For conversion of sums of money, Plaintiff would need to allege an immediate possessory interest in specific, identifiable sums converted. (Voris v. Lampert (2019) 7 Cal. 5th 1141, 1151; Zerin, supra, 53 Cal.App.4th at 452.)  Generally, money cannot be the subject of a cause of action for conversion. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395-397.) Indeed, “the simple failure to pay money owed does not constitute conversion’ . . . otherwise, the tort of conversion would swallow the significant category of contract claims that are based on the failure to satisfy “‘mere contractual right[s] of repayment.” (Voris, supra, 7 Cal. 5th at 1151.) Where the money or fund is not identified as a specific thing, the action is to be considered as one upon contract or for debt or perhaps upon some other appropriate theory—but not for conversion. (Ibid.) Notably, a mere contract expectancy of payment in the future is insufficient. (See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.App.4th 1134, 1150 [an expected commission was an “attenuated expectancy” that could not be converted as “property”].)

 

Cases permitting an action for conversion of money typically involve those who have misappropriated, commingled, or misapplied specifically identifiable funds held for the benefit of others. (PCO, supra, 150 Cal.App.4th at 396.) For example, conversion may be stated where an agent accepts a sum of money to be paid to another and fails to make the payment. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1491.) In contrast, actions for the conversion of money have not been permitted when the amount of money involved is not a definite sum. (See e.g. Software Design & Application, Ltd. v. Hoefer & Arnett, Inc. (1996) 49 Cal.App.4th 472, 485 [no conversion¿where money was allegedly misappropriated “over time, in various sums, without any indication that it was held in trust for” plaintiff]; Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229 [two gamblers who lost “approximately $1.4 million” and “approximately $120,000” was a general claim and not sufficiently ascertainable].)  

 

For example, in SP Investment Fund I LLC v. Cattell (2017) 18 Cal.App.5th 898, the court held that a complaint stated a claim for conversion where an LLC purchased an assignment of interest to receive certain monetary distributions from a partnership. There, the assignment agreement stated that the seller would hold those proceeds for the LLC’s benefit until they could be distributed after certain conditions. (Id. at 900-902.) The seller received monetary distributions from the partnership that, under the Agreement, he held in trust for LLC’s benefit. (Ibid.) He then refused to turn those funds over to the LLC, despite that the LLC owned the money per the contract. (Ibid.) The court held that this was not a generalized claim for money because there was a specific, identifiable sum of money received by the seller for the LLC’s benefit. (Id. at 907.) 

 

Other examples involving converted funds include where a real estate agent accepted commissions on behalf of himself and a business partner, but refused to give the partner his share (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1042); where a sales agent took proceeds from a consignment sale and did not remit any portion of the proceeds to the principal seller (Fischer v. Machado (1996) 50 Cal.App.4th 1069, 1072–1074); and where a client received a settlement and a lien established an attorney’s ownership interest to the specific fees in question (Weiss v. Marcus (1975) 51 Cal.App.3d 590, 599). In such cases, a defendant exercised dominion of specific, identifiable pots of money that already belongs to the plaintiff. (See Voris, supra, 7 Cal.5th at 1152–1153.) 

 

Plaintiff asserts that she has identified “readily ascertainable sums” of $444,776 belonging to nominal defendant CRC, and sums of $997.50, $97,500, and $115,469.40 belonging to Plaintiff and nominal defendant GBC or CRC. Plaintiff contends that due to her contracts, she and/or the entities are entitled to immediate possession. The Court will examine the each of the four counts.

 

Count 1

 

Militello was, and still is, entitled to the possession of money located in bank accounts for CRC, LMP, Rose, and Farmacy.” (TAC ¶ 296, emphasis added.) Lawrence has been co-mingling funds between all four accounts since early 2020. (Id.) “Lawrence and Manek have intentionally and wrongfully exerted dominion over CRC, GBC, and JV funds for their own personal benefit, inconsistent with their rightful use and access to those funds.” (¶ 297.)

 

Pursuant to the parties’ joint venture (JV) agreement, the Dispensaries and CRC were structured to have the Dispensaries operate at a loss with all revenue flowing through CRC and all payments to Lawrence, Manek, and Militello to be paid from CRC’s profits. (¶ 298.) Under the new structure, all revenues from the Dispensaries were to be transferred to and held by CRC in accordance with the tiered payment structure set forth in the Term Sheet. (Id.) The TAC alleges specific instances of conversion:

 

(a) On December 28, 2020, Manek made two unauthorized wire transfers in the amounts of $119,345 and $25,421 without consent or authority from CRC’s Board to an account held by Quantum and/or Manek. Pursuant to the JV agreement and the Term Sheet, these funds, totaling $144,766, belonged to CRC and Manek caused them to be wrongfully diverted to himself.

 

(b) On January 15, 2021, Manek made two unauthorized wire transfers in the amounts of $90,000 and $60,000 without consent or authority from CRC’s Board to an account held by Quantum and/or Manek. Pursuant to the JV agreement and the Term Sheet, these funds, totaling $150,000, belonged to CRC and could only be disbursed to Manek from CRC and upon certain financial conditions being met by CRC. As set forth herein, the conditions were not met, and even if they were, such funds still belonged to CRC.

 

(c) On February 22, 2021, Manek made an unauthorized wire transfer in the amount of $60,000 without consent or authority from CRC’s Board to an account held by Quantum and/or Manek. These funds belonged to CRC, but Manek, without permission and in violation of the Term Sheet and JV agreement, caused them to be wrongfully diverted to himself.

 

(d) On March 15, 2021, Manek made an unauthorized wire transfer in the amount of $90,000 without consent or authority from CRC’s Board to an account held by Quantum and/or Manek. These funds belonged to CRC, but Manek, without permission and in violation of the Term Sheet and JV agreement, caused them to be wrongfully diverted to himself.

 

(e) On April 19, 2021, Manek made two unauthorized wire transfers in the amounts of $90,000 and $60,000 without consent to an account held by Quantum and/or Manek. These funds, totaling $150,000, belonged to CRC, but Manek, without permission and in violation of the Term Sheet and JV agreement, caused them to be wrongfully diverted to himself.

 

(f) On May 18, 2021, Manek made an unauthorized wire transfer in the amount of $60,000 without Militello’s consent to an account held by Quantum and/or Manek. These funds belonged to CRC, but Manek, without permission and in violation of the Term Sheet and JV agreement, caused them to be wrongfully diverted to himself.

 

(g) On May 24, 2021, Manek made an unauthorized wire transfer in the amount of $90,000 without consent or authorization to an account held by Quantum and/or Manek. These funds belonged to CRC, but Manek, without permission and in violation of the Term Sheet and JV agreement, caused them to be wrongfully diverted to himself.

 

(h) On July 6, 2021, Manek made two unauthorized wire transfers in the amounts of $90,000 and $60,000 without consent or authorization to an account held by Quantum and/or Manek. These funds belonged to CRC, but Manek, without permission and in violation of the Term Sheet and JV agreement, caused them to be wrongfully diverted to himself.

 

(¶298.) Each instance of conversion states that pursuant to the contracts between the parties, the monies rightfully belonged to CRC, but were diverted to Manek/Quantum. Each of these transfers breached the JV agreements. (¶ 299.) “Payments under the JV agreement were to come from CRC’s profits, which was to be calculated using all revenue from CRC and the Dispensaries”. (¶ 300.)

 

The Court must observe the contradiction in the allegations. The conversion claim is unclear on who is seeking possession of these funds. The TAC alleges that Militello is entitled to possession of the funds. (¶296.) The TAC then alleges that CRC is entitled to possession through the contracts. (¶ 300.) The more specific allegations show that if anyone is entitled to possession it would have been CRC, not Militello personally.

 

In any event, this only states expectancy interests through the terms of the specified contracts. These are no readily identifiable sums of specific funds, but percentages of revenues due under contract which defendants have allegedly breached through their improper diversion of the funds. Plaintiff identifies no term or allegation that the funds were held in trust for herself or CRC.

 

Count 2

 

In Count 2, Militello similarly alleges Lawrence and Highland converted “$14,250 of unreported Dispensary funds into a bank account held by [Lawrence’s company] Highland.” (TAC ¶ 301.) Under the 20-year contracts, GBC was owed 7% of gross revenue, such that $997.50 of that sum belonged to GBC. (Id.) This suffers from the same deficiencies discussed in count 1.

 

Count 3

 

In count 2, the TAC again alleges that Defendants substantially interfered with GBC’s monthly distribution of 30% of Rose and Farmacy’s “monthly cash-on-hand.” (¶¶ 307-308.) Militello claims Defendants converted $67,500 and $30,000.00 belonging to GBC and to be paid to GBC in 2020. This count suffers from the same deficiencies discussed above.

 

Count 4

 

In Count 4, the TAC alleges that Defendants again interfered with GBC’s right to monthly distribution payments by underreporting the gross revenue and cash receipts for the Dispensaries as alleged herein, thereby wrongfully depriving Militello of fees that were to be paid to GBC. (¶¶ 311-317.) Underreporting, in violation of a contract, causing GBC to be paid less than they are owed, is not a claim for conversion, but breach of contract.

 

Each count of this cause of action therefore does not state a claim for conversion. Plaintiff does not allege that CRC, GBC, and certainly not herself individually, are entitled to possession of specific funds.

 

Accordingly, Defendants’ demurrer to the conversion cause of action is SUSTAINED without leave to amend.

 

Plaintiff GBC

 

Defendants argue that the entire TAC is uncertain as to which claims are asserted directly by GBC. Indeed, the TAC is uncertain as to which claims are brought by GBC, directly or indirectly. (See TAC ¶¶50-53, 61-63.) The TAC does not allege which claims are brought by which Plaintiff. Going off the titles of each cause of action, each plaintiff is apparently asserting each claim as to the defendants specified. That said, GBC cannot possibly be claiming that it asserts all of the causes of action. For instance, Plaintiff does not explain why, or if, GBC seeks to dissolve CRC, as asserted in the first cause of action. The court agrees that this would render the complaint pleading uncertain, as it becomes difficult to parse which defenses or arguments might apply to any particular cause of action. Accordingly, Defendants’ demurrer is SUSTAINED with leave to amend. Plaintiff needs to clarify which parties bring which claims, and whether those claims are derivative or direct.  As opposed to filing an amended complaint, Plaintiff is invited at the March 3, 2023, hearing to state on the record which claims are being asserted by GBC and whether those claims are derivative or direct.

 

Case Management Order/Protective Order

 

At the last CMC, the Court discussed with the parties a number of issues regarding the litigation of this case, including whether the case should be designated as complex, and what terms should be contained in the protective order.  The Court sets forth its tentative thoughts on these issues, so that the parties and Court may have a meaningful discussion on March 3, 2023.

 

The following is the Court’s proposed outline for a Case Management Order (CMO), which addresses some of the issues that have arisen during this litigation.  The Court is open to any additions to a proposed CMO:

 

[Proposed] Case Management Order:

 

On its own motion, the Court designates this action as a complex case under Rule 3.400(a) requiring exceptional judicial management.  All provisions of this CMO are deemed necessary to carry out the purposes of Rule 3.400(a) and to promote effective decision-making by the Court.  They are based upon individual consideration of this complex action, including the prior motions and filings made by the parties. 

 

Trial Date:  At the CMC, the Court will discuss the recently filed (2/23/23) cross-complaint and service of that cross-complaint.  Otherwise, at the next hearing, the Court would set trial for March 25, 2024 at 9:30 a.m.  A final status conference would be March 18, 2024 at 9:00 a.m. 

 

Motion for Summary Judgment Deadline:  The parties are ordered to schedule all MSJs at least 45 days prior to the trial deadline.

 

Mediation:  The Court will order either a mandatory settlement conference or a mediation 120 days prior to the trial date.

 

Discovery:  The timing of all discovery shall be governed by the Code of Civil Procedure and the California Rules of Court based on the trial date.

The parties shall meet and confer regarding the scheduling of all depositions, including the deposition of third-parties. Counsel shall exchange lists of all witness to be deposed and prepare a joint tentative deposition schedule listing the name of each witness, and the date and location of the proposed deposition.  Thereafter the joint deposition schedule shall be amended as necessary to keep it up to date. When a party receives a request for a deposition of a witness within its control, that party shall provide, with the next ten days, at least two alternative dates on which the deposition can proceed.

To ensure that depositions are conducted efficiently, Defendants are to confer in advance of every deposition to avoid disorganized or repetitive questioning

On a going-forward basis, the parties will assign unique Bates numbers to each page of each document they produce. Each produced document should have a prefix consisting of at least three alphabetic characters, which should reflect the name of the producing party. Thus, all parties should sequentially number-stamp every page of every document they produce in this case, with a three-letter prefix identifying the producing party (e.g., VFA00132 - the 132nd page of documents produced by Defendant, VFarm).

In light of the type and volume of discovery issues that continue to arise in this case, the Court may in the future appoint a discovery referee under Code of Civil Procedure §639, subdivision (a)(5) to hear and determine any and all discovery motions and disputes relevant to discovery in the action and to report findings and make a recommendation thereon.

As to past document productions, all parties must comply with Code of Civil Procedure § 2031.280(a)), and identify which request for production the document is responsive to along with metadata.  To the extent past productions have not complied with these requirements, compliance is ordered within 15 days. 

 

Cross-complaints:  Once the trial date is set, no party shall file any additional cross-complaints without permission of the Court. 

 

Status of unserved parties:  The parties shall submit a joint report of all unserved parties and status of service efforts to the Court within 10 days.  The Court sets a trial setting conference along with an OSC re dismissal of unserved parties for ____________, 2023, at 8:30 a.m.

 

Protective Order:

The Court will adopt the language contained in Defendants’ proposed protective order in that it strikes a balance with respect to the respective burdens placed on the parties and this case.  Defendant to submit the protective order to the Court within five days.