Judge: Matthew C. Braner, Case: 37-2021-00036475-CU-FR-CTL, Date: 2023-10-20 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - October 19, 2023

10/20/2023  09:00:00 AM  C-60 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Matthew C. Braner

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Civil - Unlimited  Fraud Demurrer / Motion to Strike 37-2021-00036475-CU-FR-CTL KOEBERLE VS PRAGER [IMAGED] CAUSAL DOCUMENT/DATE FILED:

Defendant Steven Lorber's demurrer to the fourth amended complaint ('4AC') is SUSTAINED.

A demurrer shall be sustained if the pleading 'does not state facts sufficient to constitute a cause of action.' (Code Civ. Proc., § 430.10, subd. (e).) To test the sufficiency of a cause of action, the court treats as true 'all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.' (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.) The court may also consider matters that have been judicially noticed. (Id.) The court shall give the complaint a 'reasonable interpretation, reading it as a whole and its parts in their context.' (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Here, Defendant Lorber demurs to the first, second, third, and fifth causes of action for breach of fiduciary duty, fraudulent concealment, constructive fraud, and unjust enrichment, respectively.

Defendant Lorber's central argument is that he did not owe Plaintiff a fiduciary duty solely by virtue of allegedly holding a 50% shareholder interest in Dove Business Machines, Inc. The court agrees. The 4AC plainly sets forth Plaintiff's sole basis to impose a fiduciary duty on Defendant Lorber: 'Defendant Lorber owes fiduciary duties to Dove as a 50% shareholder of the Company.' (4AC, ¶ 8.) But 50% is not a majority stake, and therefore does not trigger the same duties that a majority stake would. (See, e.g., Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108.) 50% is also not a minority stake, but more closely resembles a minority stake in terms of control than it does a majority stake, particularly when the other 50% stake is held by a single person or entity. Moreover, the court is not aware of any California case holding that a 50% shareholder interest, without more, is sufficient to establish a fiduciary duty.

Plaintiff argues that Defendant Lorber owed a fiduciary duty not only because of his 50% interest, but also because he engaged in conduct that evidences control over Dove. But the 4AC does not contain such non-conclusory factual allegations, and in fact, contains allegations that are directly contrary to the idea that Defendant Lorber controlled Dove. (See, e.g., 4AC, ¶ 17 ['Prager has contributed his time by operating and managing Dove/Semacon. Prager handles all the day-to-day management of the Company.'].) The court also does not believe the complaint can be amended to overcome this defect without running afoul of the sham pleading doctrine. (Deveny v. Entropin, Inc. (2006)139 Cal.App.4th 408, 425 ['Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment.'].) Accordingly, the demurrer is sustained as to the first cause of action, without leave to amend.

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3002527  22 CASE NUMBER: CASE TITLE:  KOEBERLE VS PRAGER [IMAGED]  37-2021-00036475-CU-FR-CTL To succeed on both his fraudulent concealment and constructive fraud causes of action, Plaintiff must allege specific facts that, if true, demonstrate Defendant Lorber owed Dove a duty of disclosure. (Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1126.) As set forth above, Defendant Lorber did not owe a fiduciary duty, and the 4AC fails to allege facts that establish any of the three alternative ways to show a duty to disclose. (See, e.g., Warner Construction Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294.) The constructive fraud cause of action is additionally defective because it requires the existence of a fiduciary duty. (See, e.g., Tyler v. Children's Home Society (1994) 29 Cal.App.4th 511, 548.) Accordingly, the demurrer is sustained as to the second and third causes of action. Plaintiff has leave to amend the complaint with respect to the second cause of action, but the demurrer is sustained without leave to amend as to the third cause of action for constructive fraud.

Finally, the 4AC still improperly includes restitution/unjust enrichment as a separate cause of action.

(See City of Oakland v. Oakland Raiders (2022) 83 Cal.App.5th 458, 477 ['There is no cause of action in California labeled 'unjust enrichment.''].) Whether styled as restitution or unjust enrichment, the remedy is available only for well-pled claims that allow for such a remedy, such as fraud or quantum meruit.

(See, e.g., Durrell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) Because the claims upon which such a remedy could have been based do not survive demurrer, the unjust enrichment 'claim' against Defendant Lorber similarly fails.

Accordingly, the demurrer is sustained as to the fifth cause of action. If Plaintiff files a fifth amended complaint, he is instructed to remove unjust enrichment as a separate cause of action and to plead it as a remedy tethered to an appropriate claim.

Plaintiff has 30 days from entry of this order to file a fifth amended complaint.

The minute order is the order of the court.

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