Judge: Maurice A. Leiter, Case: 23STCV26952, Date: 2024-04-19 Tentative Ruling

Case Number: 23STCV26952    Hearing Date: April 19, 2024    Dept: 54

Hearing Date: April 19, 2024

Department 54, Judge Maurice Leiter

Demurrer to First Amended Complaint and Motion to Strike

Moving Party: Defendant Li Wang

Responding Party: Plaintiffs Angelina Leo, Steven Nia and W1, Inc.

T/R:     DEFENDANT’S DEMURRER TO THE SECOND AND THIRD CAUSES OF ACTION IS SUSTAINED. THE DEMURRER TO THE FIRST AND FOURTH CAUSES OF ACTION IS OVERRULED.

THE MOTION TO STRIKE IS GRANTED AS TO PUNITIVE DAMAGES ONLY.

PLAINTIFFS TO FILE AND SERVE A SECOND AMENDED COMPLAINT WITHIN

30 DAYS OF NOTICE OF RULING. DEFENDANT TO FILE AND SERVE A RESPONSE WITHIN 30 DAYS THEREAFTER.

DEFENDANT TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, oppositions, and replies.

BACKGROUND

On November 17, 2023, Plaintiffs Angelina Leo, Steven Nia and W1, Inc. filed the operative first amended complaint against Defendant Li Wang, asserting causes of action for (1) breach of fiduciary duty; (2) unpaid wages; (3) fraud; and (4) conversion.

The action arises from a joint business venture to sell cannabis products under a company called Lucky. Plaintiffs allege Defendant, an officer of W1, misappropriated corporate funds and misrepresented their ownership of and access to a cannabis factory in Kentucky.

REQUEST FOR JUDICIAL NOTICE

Defendant’s request for judicial notice is GRANTED as to the existence of the documents, but not as to the truth of the matters asserted therein.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it.  (CCP § 430.50(a).)  A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations.  (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.)  The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law.  (Id. at 732-33.)  The complaint is to be construed liberally to determine whether a cause of action has been stated.  (Id. at 733.)

A. Statute of Limitations

Defendant demurs to the complaint on the grounds that it is barred by the applicable three-year statute of limitations. Defendant asserts that pleadings in the related case “clearly indicate” Plaintiffs knew of the allegations in this action no later than October 2020 when Nia and Leo left Lucky. Defendant argues that this action must have been filed no later than October 2023. Plaintiffs filed the complaint on November 2, 2023.

Defendant provides no explanation as to how the pleadings show Plaintiffs knew of their claims in October 2020. Defendant merely concludes so. The demurrer cannot be sustained on this basis.

B. First Cause of Action for Breach of Fiduciary Duty

The elements for a breach of fiduciary duty cause of action are “the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604.)

Defendant demurs to the first cause of action on the grounds that it is uncertain and fails to state sufficient facts. Plaintiffs, shareholders of Lucky, allege Defendant owed them fiduciary duties as an officer of Lucky, Defendant breached this duty by selling products off the books and embezzling and converting funds, and Plaintiffs were damaged by this breach. This is sufficient to allege breach of fiduciary duty.

The demurrer to the first cause of action is OVERRULED.

C. Second Cause of Action for Unpaid Wages

Defendant demurs to the second cause of action on the grounds that it is barred by the statute of limitations and that Defendant, an individual, cannot be held liable for the company’s failure to pay wages. The FAC lacks allegations showing how Defendant Wang is personally liable for failure to pay wages.

The demurrer to the third cause of action is SUSTAINED.

D. Third Cause of Action for 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.)

Defendant demurs to the third cause of action on the ground that it is not pleaded with the requisite specificity. The Court agrees. Plaintiffs allege Haifeng Wu, Defendant’s husband, made various misrepresentations about Lucky’s assets and access to cannabis products. Plaintiffs do not allege that Wang herself made any misrepresentations. This is insufficient to support a claim of fraud against Wang.

The demurrer to the third cause of action is SUSTAINED.

E. Fourth Cause of Action for Conversion

To plead a cause of action for conversion, one must allege (1) the plaintiff’s ownership or right to possession of personal property; (2) defendant’s disposition of the property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

Defendant asserts Plaintiffs have failed to state sufficient facts to support a cause of action for conversion. Plaintiffs allege Defendants converted money and assets belonging to Plaintiffs. This is sufficient to allege conversion.

The demurrer to the fourth cause of action is OVERRULED.

F. Motion to Strike

Any party, within the time allowed to response to a pleading, may serve and file a notice of motion to strike the whole or any part" of that pleading. (CCP § 435(b)(1).) “The Court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false or improper matter asserted in any pleading; (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the Court." (CCP § 436.)

Defendant moves to strike the prayer for punitive damages and certain allegations that Defendant believes conflict with pleadings in the related case. As Plaintiffs have failed to allege sufficient facts to establish fraud, Plaintiffs have not alleged entitlement to punitive damages. The Court declines to strike the remaining allegations. Plaintiffs’ allegations do not clearly conflict with the other pleadings.

The motion to strike is GRANTED as to punitive damages only.