Judge Mel Red Recana, Case Number: 19STCV43092, Date: 2024-03-08 Tentative Ruling

Defendants Sumner and Harrison’s Motion for Summary Judgment is DENIED. Defendants’ Motion for Summary Adjudication is GRANTED as to the 2^nd cause of action for negligent misrepresentation and 3^rd cause of action for negligence and DENIED as to all remaining issues.

Plaintiff invested $185,000 with Defendants for startup of a North American Soccer League franchised based in Orange County, CA. Plaintiff alleges he relied on the statements of Defendants Joseph Sumner and Paul Harrison to invest the funds. Plaintiff alleges that once he gave the $185,000 to Defendants, Defendants Sumner and Harrison did not use the funds to start a North American Soccer League and instead used the money for their own personal and business use.

The operative complaint is the First Amended Complaint filed on December 2, 2020. The FAC alleges (1) breach of fiduciary duty; (2) negligent misrepresentation; (3) negligence; (4) fraud and deceit; (5) fraudulent concealment; (6) demand for accounting; (7) breach of contract; (8) breach of the implied covenant of good faith and fair dealing; (9) unfair competition; (10) conversion.

Summary judgment is proper “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Code of Civil Procedure §437c(c).) From commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to a judgment as a matter of law. There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof. (Aguilar v. Atlantic Richfield Company (2001) 25 Cal.4th 826, 855.)

Pursuant to Code of Civil Procedure §437c(f)(1), a party may properly seek summary adjudication of one or more causes of action, one or more affirmative defenses, the issue of punitive damages or the issue of duty. (Code of Civil Procedure §437c(f)(1).) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim of damages or an issue of duty.” (Id.)

Where a defendant seeks summary judgment or adjudication, he must show that either “one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.” (Code of Civil Procedure §437c(o)(2).) A defendant may satisfy this burden by showing that the claim “cannot be established” because of the lack of evidence on some essential element of the claim. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 574, 590.) Once the defendant meets this burden, the burden shifts to plaintiff to show that a “triable issue of one or more material facts exists as to that cause of action or defense thereto.” (Id.)

“A party is entitled to summary judgment only if it meets its initial burden of showing there are no triable issues of fact and the moving party is entitled to judgment as a matter of law. This is true even if the opposing party fails to file any opposition. The court's assessment of whether the moving party has carried its burden—and therefore caused a shift—occurs before the court's evaluation of the opposing party's papers. Therefore, the burden on the motion does not initially shift as a result of what is, or is not, contained in the opposing papers.” (Mosley v. Pacific Specialty Insurance Company (2020) 49 Cal.App.5th 417, 434–435 (landlord’s failure to address issue of whether they were aware of their tenant’s marijuana growing operation was not grounds to grant summary judgment where moving party failed to satisfy its initial burden as to the issue); Thatcher v. Lucky Stores, Inc. (2000) 79 Cal.App.4th 1081, 1086-1087 (court cannot grant summary judgment based merely on lack of opposition; court must first determine if the moving party has satisfied its burden).)

In addition, the evidence and affidavits of the moving party are construed strictly, while those of the opponent are liberally read. (Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 100.) “All doubts as to the propriety of granting the motion (whether there is any issue of material fact [Code of Civil Procedure] § 437c) are to be resolved in favor of the party opposing the motion (i.e., a denial of summary judgment).” (Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502.)

Defendants’ Objection to ¶¶7, 12, 24, 34, 41, 55, 60, 61 of Vanderbilt Dec.—SUSTAIN

Plaintiff’s Objection to Harrison Dec.—OVERRULE as to ¶7 of Harrison Dec. The Court does not rule on Plaintiff’s remaining objections as it did not rely on any of those portions of the Harrison declaration in its ruling. (CCP §437c(q)—In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.)

Defendants Harrison and Sumner move for summary judgment on grounds that Plaintiff has no evidence to support his alter ego theory. Defendants argue Plaintiff testified at deposition that he was unable to admit or deny whether or not Serious Soccer, LLC paid its taxes in 2017, 2018 and 2019. Defendants argue Plaintiff admitted at deposition that Serious Soccer conducted business. Defendants argue Plaintiff admitted he did not know if Serious Soccer was adequately capitalized or if Harrison and Sumner comingled personal or corporate funds and assets with that of Serious Soccer.

Defendants argue Plaintiff’s breach of fiduciary duty claim fails, because they did not owe him a fiduciary duty. Defendants argue there is no written agreement or contract in which Serious Soccer was bound or obligated to form a soccer team within the North America Soccer League. Defendants argue Plaintiff was fully aware after he invested $185,000 that Serious Soccer would have to pivot to forming a soccer team within the National Premier Soccer League. Defendants argue discovery has established that Plaintiff’s $185,000 was used for Serious Soccer’s business expenses, not Defendants’ personal use. Defendants argue they have no relationship with Plaintiff that would impose a fiduciary duty on them.

Defendants argue Plaintiff’s negligent misrepresentation claim fails, because Defendants never represented to Plaintiff that he would the franchise would be an NASL franchise in Orange County, that he would be apprised of Serious Soccer’s business if he invested or that he would receive distributions. Defendants argue they never made such representations and there was never any written agreement or contract imposing such obligations on Serious Soccer.

Defendants argue Plaintiff’s negligence claim fails, because it is barred by the statute of limitations. Defendants argue their alleged negligence occurred more than two years before Plaintiff filed the complaint on December 2, 2019. Defendants argue there is also no agreement imposing any obligation on them to form a soccer team within the NASL. Defendants argue they were forced to pivot to forming a team in the NPSL after Plaintiff invested, and they did so with his full knowledge.

Defendants argue the fraud and deceit claim fails, because there is no evidence that their representation to Plaintiff that they intended to form a team within the NASL was knowingly false when made. Defendants argue there is no evidence that they ever represented to Plaintiff that he would receive distributions or that he would receive information regarding his investment, nor did Defendants ever misrepresent their separate business interest and endeavors.

Defendants argue the fraudulent concealment claim fails. Defendants argue there is no evidence that they misused the $185,000 for other businesses, or that Serious Soccer ever shared that amount with other businesses.

Defendants argue the accounting claim fails because they did not owe Plaintiff a fiduciary duty. Defendants argue Plaintiff is also not demanding an accounting of some unascertainable amount. Defendants argue Plaintiff is seeking information regarding what became of his $185,000 investment. Defendants argue they have already provided Plaintiff with all documentation establishing that the $185,000 was used for Serious Soccer LLC’s expenses.

Defendants argue the breach of contract claim fails, because there was no written contract between Defendants Harrison and Sumner and Plaintiff. Defendants argue they were merely principals. Defendants argue the Term Sheet relied upon by Plaintiff expressly states that it creates no obligations on the part of any parties. Defendants argue there was never any agreement to negotiate, nor was a Securities Purchase Agreement ever signed.

Defendants argue the breach of implied covenant of good faith and fair dealing claim fails for the same reason as the breach of contract claim. Defendants argue there was never an agreement between the parties imposing any obligations on them

Defendants argue the cause of action under Business and Professions Code §17200 fails, because there is no evidence of fraudulent conduct. Defendants argue, because the claims for common law fraud fail, Plaintiff’s claim for violation of 17200 based on fraud also fails.

Defendants argue the conversion claim fails, because Plaintiff does not have an ownership right to the $185,000 he transferred to Serious Soccer, LLC in 2016. Defendants argue Plaintiff has no evidence of any contract or agreement entitling him to reimbursement of his $185,000 investment. Defendants argue Plaintiff cannot state a claim for conversion based on an alleged failure to earn a return on Plaintiff’s investment.

Defendants argue summary adjudication of Plaintiff’s claim for punitive damages should be granted. Defendants argue Plaintiff’s punitive damages claim is based on the breach of fiduciary, fraud and deceit and fraudulent concealment claims fail. Defendants argue that, because those underlying claims fail, Plaintiff’s punitive damages claim also fails.

Plaintiff argues Serious Soccer is a forfeited LLC and has been since 2018. Plaintiff argues it therefore may not defend itself in this action.

Plaintiff argues triable issues remain as to the alter ego allegations. Plaintiff argues neither Harrison nor Sumner are registered investment brokers and they committed legal violations when they solicited Plaintiff’s investment. Plaintiff argues Harrison and Sumner owed the LLC as member or managers a duty of loyalty.

Plaintiff argues Defendants owed him a fiduciary duty. Plaintiff argues directors owe a fiduciary duty to stockholders. Plaintiff argues a trier of fact must determine whether Defendants breached their fiduciary duty.

Plaintiff argues Defendants also withheld documents and information from him. Plaintiff argues this forms the basis of his negligent misrepresentation claim.

Plaintiff argues Defendants committed fraud by making untrue statements of fact or omitting statements of material fact when selling Plaintiff a security. Plaintiff argues his business interest in Serious Soccer was a security, because of legal control, practical control and capacity to control.

Plaintiff argues there is a triable issue of fact as to conversion. Plaintiff argues conversion can be based on money.

Plaintiff argues he has also satisfied the elements of breach of contract and breach of the covenant of good faith and fair dealing. Plaintiff argues he testifies to these elements in his declaration.

Plaintiff cites the elements of an accounting action but makes no argument as to why the accounting action is not subject to summary judgment.

Plaintiff argues there is a triable issue of fact as to the punitive damages claim based on his declaration. Plaintiff argues he sets forth sufficient facts to establish the elements of punitive damages.

Defendants argue Plaintiff’s separate statement fails to cite any evidence and is therefore procedurally defective. Defendants argue Plaintiff’s separate statement merely objects to Defendants’ evidence but fails to present any evidence to support any claimed dispute.

Defendants argue there are no triable issues of fact as to the alter ego allegations. Defendants argue there is no attempt by Plaintiff to present any evidence of a unity of interest or any inequitable result if the separate corporate existence of Serious Soccer. Defendants argue the cherry picked bank statements Plaintiff submits does not establish unity of interest. Defendants reiterate that Plaintiff could not testify as to key issues that would support alter ego. Defendants argue Plaintiff identifies corporate formalities that had to be maintained but fails to establish that they were in fact not maintained. Defendants argue Plaintiff’s claim that John Koos and Susan Katz were offered finders’ fees is unsupported by the evidence cited by Plaintiff.

Defendants argue Plaintiff fails to raise a triable issue of fact as to whether Defendants owed him a fiduciary duty. Defendants argue Plaintiff fails to demonstrate that he was a shareholder of Serious Soccer.

Defendants argue Plaintiff fails to establish any negligent misrepresentations by them. Defendants argue the receipts presented do not establish that there were negligent misrepresentations or even that Plaintiff’s $185,000 was misused.

Defendants argue Plaintiff fails respond to their statute of limitations argument. Defendants argue the claim is undisputedly time barred.

Defendants argue Plaintiff’s arguments as to the fraud claims are indecipherable. Defendants argue there is no evidence that Defendants falsely represented that they would use Plaintiff’s investment to form a franchise in the NASL or that he would receive distributions. Defendants argue there was no written agreement obligating them to do so.

Defendants argue Plaintiff fails to respond to their arguments regarding the accounting claim.

Defendants argue Plaintiff fails to respond to their arguments that there was never any written agreement to support the breach of contract or breach of implied covenant of good faith and fair dealing claims.

Defendants argue Plaintiff fails to respond to their arguments regarding the Business and Professions Code §17200 claim.

Defendants argue Plaintiff fails to respond to their arguments regarding the conversion claim.

Defendants argue Plaintiff fails to respond to their arguments regarding the punitive damages claim.

Plaintiff alleges Defendants Harrison and Sumner used Serious Soccer as their alter ego. (FAC, ¶17.) As moving party, Defendants must negate this allegation with admissible evidence before the burden shifts to Plaintiff to raise a triable issue of material fact. (Mosley, supra, 49 Cal.App.5th at 434–435; Thatcher, supra, 79 Cal.App.4th at 1086-1087.)

Defendants attempt to satisfy their burden as moving parties by asserting that Plaintiff cannot establish the elements of alter ego against them. A defendant may satisfy its initial burden on summary judgment by showing that the claim “cannot be established” because of the lack of evidence on some essential element of the claim. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 574, 590.) Summary judgment still requires, however, the presentation of evidence in the form of “affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice” to demonstrate that plaintiff does not possess and cannot reasonably obtain necessary evidence to establish his or her claim. (Id. at 854.) A defendant may rely upon a plaintiff’s factually devoid responses to establish that plaintiff does not possess and cannot reasonably obtain necessary evidence. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 590.)

For this reason, a defendant does not meet its burden under CCP §437(c)(o)(1) by merely “pointing out” or “arguing” that the plaintiff does not possess or cannot reasonably obtain necessary evidence. (Id.; Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89 (defendant bank did not meet its burden on summary judgment of wrongful foreclosure by merely arguing that plaintiff lacked evidence to support her claim and only documentary evidence submitted were the loan documents); Gaggero v. Yura (2003) 108 Cal.App.4th 884, 890 (defendant did not establish plaintiff’s lack of evidence or inability to reasonably obtain evidence of plaintiff’s ability and willingness to perform by pointing to plaintiff’s refusal to answer certain questions during deposition on grounds of a meritless privacy objection; such a refusal, regardless of its merit, was neither an admission nor a factually devoid discovery response).

For example, in Union Bank, plaintiff sued defendants for various fraud claims. Defendants moved for summary judgment based on plaintiff’s responses to three RFAs and the accompanying Form Rog 17.1. Plaintiff refused to admit that defendants (i) did not commit fraud against Plaintiff or (ii) that defendants did not conspire to defraud Plaintiff. Id. at 578. In connection with form rog 17.1 plaintiff could cite to no evidence or facts supporting their refusal to admit either of these facts. (Id.) Compounding the damaging effect of these factually devoid responses was plaintiff’s admission that defendant “took no inappropriate action in connection with its role in the transactions.” (Id.) The combination of these facts sufficiently met defendant’s moving burden. (Id. at 592.) Due to plaintiff’s admission that defendants did not engage in any “inappropriate action,” plaintiff failed to raise a triable issue of fact based on evidence that potentially raised a reasonable inference of fraud. (Id. at 593.)

Defendants do not present any affirmative evidence to negate Plaintiff’s claims of alter ego. Defendants rely on Plaintiff’s discovery responses. Plaintiff indicated in his RFA responses and deposition testimony that he lacked knowledge or information to admit or deny the facts necessary to establish alter ego, e.g. inadequate capitalization, and whether Serious Soccer conduct business. (Defendants’ Separate Volume of Exhibits, Exs. P (RFAs) and Q (Responses to RFAs), RFA Responses to RFA Nos. 4-12.) Later, Plaintiff testified at deposition that Serious Soccer did conduct business. (Id. at Ex. R, 246:7-8).

Plaintiff’s discovery responses are factually devoid. However, they do not establish Plaintiff inability to obtain such evidence given a reasonable opportunity. Factually devoid responses can be used to establish that plaintiff does not possess and cannot reasonably obtain necessary evidence. Defendants therefore fail to establish Plaintiff’s inability to establish alter ego against them based on Plaintiff’s discovery responses.

A fiduciary duty may arise from fiduciary and/or confidential relationships. While the two relationships are often treated as synonymous, they are distinct. “Technically, a fiduciary relationship is a recognized legal relationship such as guardian and ward, trustee and beneficiary, principal and agent, or attorney and client whereas a ‘confidential relationship’ may be founded on a moral, social, domestic, or merely personal relationship as well as on a legal relationship.” (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1160-1161.)

“While breach of fiduciary duty is a question of fact, the existence of legal duty in the first instance and its scope are questions of law.” (Kirschner Brothers Oil, Inc. v. Natomas Co. (1986) 185 Cal.App.3d 784, 790.) However, whether a relationship existed that may give rise to the duty presents a question of fact. (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 272, fn. 6.)

“[T]he existence of a confidential relationship generating a fiduciary duty is a question of fact. Nonetheless, because of the vagueness of the common law definition of the confidential relation that gives rise to a fiduciary duty, and the range of the relationships that can potentially be characterized as fiduciary, the ‘essential elements’ have been distilled as follows: 1) The vulnerability of one party to the other which 2) results in the empowerment of the stronger party by the weaker which 3) empowerment has been solicited or accepted by the stronger party and 4) prevents the weaker party from effectively protecting itself.” (Persson, supra, 125 Cal.App.4th 1141, 1160-1161.) Vulnerability is the necessary predicate for existence of a confidential relation. (Id.)

A list of legally recognized fiduciary relationships is set forth in Oakland Raiders v. NFL (2005) 131 Cal.App.4th 621, 632. However, the court specifically stated in Oakland that the list set forth therein was merely inclusive and not exclusive, prefacing the list with the following statement: “While this list of special relationships is one that ‘is not graven in stone’, it is useful to identify many of the relationships that give rise to fiduciary duties.” (Oakland Raiders, supra, 131 Cal.App.4th at 632 (including agent-principal, attorney-client and physician-patient).

Defendants’ evidence establishes that (1) Harrison was a manager of Serious Soccer LLC (Defendants’ SSUMF No. 98, Harrison Dec., ¶3, Sumner Dec., ¶3); (2) Sumner was a manager of Serious Soccer LLC (Defendants’ SSUMF No. 99, Harrison Dec., ¶3, Sumner Dec., ¶3); (3) Harrison and Sumner actively solicited Plaintiff’s investment in Serious Soccer LLC’s proposed NASL franchise (Harrison Dec., ¶¶14-18; Sumner Dec., ¶¶14-18); (4) Plaintiff and Serious Soccer LLC executed the Term Sheet for the Private Placement of Series A Preferred Units of Serious Soccer, LLC (Defendant’s Separate Volume of Evidence, Ex. L); and (5) Plaintiff ultimately transferred $185,000 to Serious Soccer, LLC as an investor (Harrison Dec., ¶¶31, 39 and 40.)

Defendants’ evidence fail to negate Plaintiff’s allegation of a fiduciary duty. Defendants solicited and received $185,000 from Plaintiff as managers of Serious Soccer, LLC. “The manager of an LLC has a fiduciary duty and owes to the members of the LLC the same duties of loyalty and good faith as a partner owes to the partnership and its partners.” (Feresi v. The Livery, LLC (2014) 232 Cal.App.4^th 419, 425.) Questions of fact remain as to Plaintiff’s status. Was he a member? Even if Plaintiff was not a member of the LLC, he was undisputedly an investor who entrusted $185,000 to Defendants’ management.

Fiduciary relationships include a joint venture, a partnership or an agency. (Cleveland v. Johnson (2012) 209 Cal.App.4^th 1315, 1339 (upholding jury finding of fiduciary duty owed by preincorporation promoter and corporation to investor ). The law also imposes a fiduciary duty on “preincorporation investors,” “the indistinguishable factual equivalent of a shareholder or member or subscriber.” (Id. at 1344.) “We see no reason why a promoted, who undoubtedly has a fiduciary duty to investors who later receive stock certificates entitling them to share in the profits of the enterprise, should not likewise have a fiduciary duty to initial investors who do not receive stock but are entitled by contract to share in the profits of the enterprise.” (Id. at 1343.)

Even if Defendants refuse to concede that Plaintiff had formal status as a member of the LLC, the evidence supports a finding that Plaintiff entered into a joint venture, partnership or agency with Defendants in the handling of his $185,000 investment or that he was akin to a member who never received units despite investing based on an agreement to do so. Defendants’ evidence fails to negate the existence of a fiduciary duty as an issue of law.

Defendants’ Motion for Summary Judgment is denied as to the first cause of action of breach of fiduciary duty.

IV. 2^nd c/a for Negligent misrepresentation, 4^th c/a for fraud and 5^th c/a for fraudulent concealment—GRANT as to negligent misrepresentation and DENY as to fraud and concealment

Defendants’ evidence fails to negate Plaintiff’s allegations of misrepresentations alleged in Plaintiff’s complaint. Plaintiff’s complaint alleges that Sumner and Harrison personally represented to him that Serious Soccer was going to be an NASL Franchise in Orange County, CA, and in exchange for Plaintiff’s investments, they promised he would be an owner in Serious Soccer’s NASL franchise and he would be kept apprised of Serious Soccer’s business and would receive distributions per the terms of the Term Sheet. (FAC, ¶¶47 and 59.) Plaintiff also alleges Defendants affirmatively concealed and misrepresented their substantial engagement in separate business interests and endeavors, their connection to business entities who received his investment and the sharing of Serious Soccer’s capital with other entities owned by them. (FAC, ¶¶49, 60, 66.)

Defendants’ evidence does not negate Plaintiff’s allegations regarding misrepresentations they personally made to him. Defendants focus on the Term Sheet and the fact that the Term Sheet does not make any of the alleged misrepresentations. (Defendants’ SSUMF Nos. 207-209, 217-226.) However, that has never been Plaintiff’s position based on his FAC. Plaintiff alleges that Defendants personally made these misrepresentations to him. Defendants’ declarations do not deny that they ever made such misrepresentations. (Harrison Dec., ¶¶13-18; Sumner Dec., ¶¶13-18.) Defendants fail to negate an essential element of Plaintiff’s fraud or concealment claims. Defendants’ motion for summary judgment or adjudication of the 4^th and 5^th causes of action for fraud and fraudulent concealment is denied.

Defendants also argue that the misrepresentations cannot form the basis of a negligent misrepresentation cause of action, because they do not affirmatively misrepresent a past or existing material fact. “The elements of negligent misrepresentation are well-established. A plaintiff must prove the following in order to recover. Misrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another's reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 983.)

The alleged negligent misrepresentations do fail to plead misrepresentation of a past or existing material fact, and to the extent they are false promises, there is no cognizable claim for negligent false promise. Plaintiff fails to respond to Defendants’ argument that the misrepresentations are not of an existing or material fact. As such, the motion for summary adjudication is granted as to the negligent misrepresentation claim.

Defendants’ motion for summary adjudication of the 4^th and 5^th causes of action for fraud and concealment is denied. Defendants’ motion for summary adjudication of the negligent misrepresentation claim is granted.

According to Plaintiff’s FAC, he demanded that his investment be returned on August 3, 2017. (FAC, ¶35.) Plaintiff alleges that after sending his August 3, 2017 email, Defendants ceased all contact with him. (FAC, ¶36.) Plaintiff filed this action on December 20, 2019, more than two years after his demand email for return of his investment. Defendants therefore establish that Plaintiff’s negligence claim is barred by the two-year statute of limitations under CCP §335.1.

In opposition, Plaintiff failed entirely to address this argument. As such, Plaintiff fails to raise a triable issue of material fact as to Defendant’s defense based on statute of limitations.

Defendants’ Motion for Summary Adjudication of Plaintiff’s 3^rd cause of action for negligence is granted.

An action for an accounting may be brought where (1) a fiduciary relationship exists between the parties or (2) the accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable. (5 Witkin, Cal. Proc. (6th ed. 2021) Plead, §815.)

(2) A balance due from the defendant to the plaintiff that can only be ascertained by an accounting. (Id.)

Defendants argue Plaintiff’s claim for accounting fails, because (1) there is no fiduciary relationship between Plaintiff and Defendants; and (2) the balance Plaintiff claims due is a for a specific sum ($185,000). However, as discussed in connection with the breach of fiduciary duty claim, triable issues of fact remain as to whether Defendants owed Plaintiff a fiduciary duty.

Defendants’ Motion for Summary Adjudication of the 6^th cause of action for accounting is denied.

VII. 7^th cause of action for breach of contract and 8^th cause of action for breach of the implied covenant of good faith and fair dealing—DENY

Defendants argue the Term Sheet was not an enforceable contract, as it did not impose any obligations on either party. The term sheet contains the follow statement, “This Term Sheet summarizes the principal terms of the proposed financing of Serious Soccer, LLC (the ‘Company’). This Term Sheet is for discussion purposes only; there is no obligation on the part of any negotiating party until a definitive securities Purchase Agreement is signed by all parties. This Term Sheet does not constitute an offer to sell or an offer to purchase securities.” (Defendants’ Separate Volume of Documentary Evidence, Ex. L, VAN000129.) The sheet is signed by both Serious Soccer, LLC (by Harrison as manager thereof) and Plaintiff as “Investor.” (Id. at VAN000134.)

Defendants claim they sent this Term Sheet to Plaintiff to solicit his investment, representing that if he invested, these would be some of the terms of his investment. (Harrison Dec., ¶¶14-18; Sumner Dec. ¶¶14-18.) Plaintiff undisputedly invested $185,000 into Serious Soccer LLC after his discussions with Defendants and receipt of the Term Sheet. (Harrison Dec., ¶¶31, 39 and 40.) Plaintiff undisputedly never signed a Securities Agreement as contemplated by the Term Sheet. (Sumner Dec., ¶78; Harrison Dec., ¶78.) However, it is also undisputed that Defendants accepted Plaintiff’s $185,000 investment and used it. (Harrison Dec., ¶¶31, 39, 40, 78.)

According to Plaintiff’s FAC, Plaintiff received this term sheet and repeatedly demanded that a Securities Purchase Agreement be executed. (FAC, ¶80; Plaintiff’s Amended Dec., ¶¶25-29[1].) Defendants testify that Plaintiff never asked for execution of such an agreement before transferring any funds or after transferring his $45,000 initial payment or his second $140,00 payment. (Harrison Dec., ¶31.)

While it is true that a purported contract is not enforceable if it imposes no obligations on one party (Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 94–95), courts must interpret the provisions of a contract to avoid rendering the instrument illusory.” (Id.) Further, “[w]hen a party is given absolute discretion by express contract language, the courts will imply a covenant of good faith and fair dealing to limit that discretion in order to create a binding contract and avoid a finding that the promise is illusory.” (Hester v. Public Storage (2020) 49 Cal.App.5th 668, 680, fn. 3.)

The Term Sheet outlined the basis on which Plaintiff would invest funds into Serious Soccer, LLC. The Term Sheet states, “there is no obligation on the part of any negotiating party until a definitive securities purchase agreement is signed by all parties.” (Defendants’ Exhibit L.) Plaintiff invested funds and Defendants accepted the funds but never issued executed a Securities Purchase Agreement with him despite Plaintiff’s investment in response to the Term Sheet. Triable issues of fact remain as to whether the Term Sheet formed part of an agreement to execute or further negotiate the terms of a Securities Purchase Agreement, particularly given Plaintiff’s ultimate investment, and whether Defendants’ failure to issue such an agreement after taking the investment was a breach of the implied covenant of good faith and fair dealing.

VIII. 9^th cause of action for violation of Business & Professions Code §17200—DENY

Defendants move for summary adjudication of this claim on grounds that Plaintiff’s fraud claims fail as a matter of law and therefore the fraud prong of 17200 cannot be satisfied as a matter of law. Defendants’ argument fails, because triable issues of fact remain as to Plaintiff’s fraud and concealment claims.

Moreover, the fraud prong of 17200 is not the same as common law fraud. “In order to state a cause of action under the fraud prong of the UCL a plaintiff need not show that he or others were actually deceived or confused by the conduct or business practice in question. “The ‘fraud’ prong of [the UCL] is unlike common law fraud or deception. A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to be deceived.” (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167.)

Defendants’ motion for summary adjudication of the 9^th cause of action for violation of B&PC §17200 is denied.

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are: (1) the plaintiff's ownership or right to possession of the property at the time of the conversion; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages. 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 441, 451-452.) Money cannot be subject to an action for conversion unless a “specific sum capable of identification is involved.” (Fischer v. Machado (1996) 50 Cal.App.4th 1069, 1072.)

Triable issues of fact remain as to whether Defendants’ wrongfully executed dominion over Plaintiff’s funds by their fraudulent acts. Contrary to Defendants’ position, Plaintiff is asserting a legal right to the $185,000 on grounds that Defendants’ defrauded him of that money.

Defendants’ Motion for Summary Adjudication of the 10^th cause of action for conversion is denied.

“In the usual case, the question of whether the defendant's conduct will support an award of punitive damages is for the trier of fact, since the degree of punishment depends on the peculiar circumstances of each case. But the issue may be resolved on summary judgment, giving due regard to the higher proof standard. While the clear and convincing evidentiary standard is a stringent one, it does not impose on a plaintiff the obligation to prove a case for punitive damages at summary judgment. However, where the plaintiff's ultimate burden of proof will be by clear and convincing evidence, the higher standard of proof must be taken into account in ruling on a motion for summary judgment or summary adjudication, since if a plaintiff is to prevail on a claim for punitive damages, it will be necessary that the evidence presented meet the higher evidentiary standard. Summary judgment on the issue of punitive damages is proper only when no reasonable jury could find the plaintiff's evidence to be clear and convincing proof of malice, fraud or oppression.” (Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 762; Pacific Gas and Electric Company v. Superior Court (2018) 24 Cal.App.5th 1150, 1158–1159.) The party moving for adjudication of a plaintiff’s punitive damages claim bears the initial burden of production. (CCP §437c(f)(1) and (2); Johnson & Johnson v. Supr. Ct. (2011) 192 Cal.App.4th 757, 761.)

Defendants argue they are entitled to summary adjudication of the punitive damages claim, because Plaintiff’s breach of fiduciary duty, fraud and conversion claims fails as a matter of law. However, as discussed above, triable issues of fact remain as to these claims and the motion for summary judgment or adjudication is denied as to them.

For the aforesaid reasons, Defendants Sumner and Harrison’s Motion for Summary Judgment is DENIED. Defendants’ Motion for Summary Adjudication is GRANTED as to the 2^nd cause of action for negligent misrepresentation and 3^rd cause of action for negligence and DENIED as to all remaining issues.

[1] Plaintiff inexplicably claims in ¶52 that he did not receive the Term Sheet attached as Defendants’ Exhibit L. (Plaintiff’s Amended Declaration, ¶52.) However, Plaintiff’s Exhibit A to FAC

Superior Court of California

County of Los Angeles

Case No.: 19STCV43092