Judge: Michelle C. Kim, Case: 23STCV01974, Date: 2023-08-07 Tentative Ruling

Case Number: 23STCV01974    Hearing Date: August 7, 2023    Dept: 31

TENTATIVE

Defendant’s motion for an undertaking is DENIED without prejudice.

Legal Standard

“When the plaintiff in an action or special proceeding resides out of the state, or is a foreign corporation, the defendant may at any time apply to the court by noticed motion for an order requiring the plaintiff to file an undertaking.”  (Code Civ. Proc., § 1030(a).)  The plaintiff, however, will not be required to file an undertaking unless “there is a reasonable possibility that the moving defendant will obtain judgment in the action or special proceeding.”  (Id., § 1030(b).)  The motion must be accompanied by an affidavit stating the nature and amount of costs and attorney’s fees the defendant has incurred and expects to incur.  (Id.)   

If the motion is granted and the plaintiff fails to file the undertaking within the time allowed, the plaintiff’s action or special proceeding shall be dismissed as to the defendant in whose favor the order requiring the undertaking was made.  (Code Civ. Proc., §1030(d).)  “The determinations of the court under this section have no effect on the determination of any issues on the merits of the action or special proceeding and may not be given in evidence nor referred to in the trial of the action or proceeding.”  (Id., §1030(f).) 

The second prong of the statute requires that a defendant establish that it is “reasonably possible” that it would obtain a judgment. (Baltayan v. Estate of Getemyan (2001) 90 Cal.App.4th 1427, 1432 [A defendant is “not required to show that there [is] no possibility that [plaintiff] [can] win at trial, but only that it [is] reasonably possible that [defendant] [will] win.”].) The defendants in Baltayan met this burden by reference to the arbitral award, award letter, and the police report of the incident.  (Id.)  Finally, Baltayan stated that, on appeal, the appellate court is merely concerned with finding whether there is substantial evidence to support the trial court’s decision; it made no direct comment on what amount of evidence was required to demonstrate a reasonable probability.  (Id. at 1433.) 

Request for Judicial Notice

Defendants requests the Court to take judicial notice of the Request for Dismissal as to Defendant Daniel Sallus.

The request is GRANTED pursuant to Evidence Code section 452(d).

Discussion

Defendant moves for a court order requiring Plaintiff to post an undertaking in the amount of $200,000 on grounds that Plaintiff resides outside of California and Defendant has a reasonable possibility of prevailing in this case. 

It is undisputed that Plaintiff resides out of state.

However, as to showing that Defendant has a reasonable possibility of prevailing, Defendant argues the four corners of Plaintiff’s Complaint is focused on what Zumaworks LLC did to breach a contract. Plaintiff submitted its own Lease Agreement, which details that Sirikci was neither an individual guarantor or party to the contract. Defendant argues that there is no evidence, let alone any allegation, that (1) Sirikci has any alter ego liability (2) that Sirikci personally engaged in tortious conduct, or (3) that Sirikci explicitly agreed to personal liability in this lawsuit.

To invoke the alter ego doctrine, the plaintiff must plead unity of interest and ownership and that an inequity will result if the corporate entity is treated as the sole actor.  (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.)  Factors to consider in applying the doctrine include the commingling of funds and other assets, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, inadequate capitalization, and disregard of corporate formalities.  (Sonora Diamond Corp. v Superior Court (2000) 83 Cal.App.4th 523, 538-39.) 

Defendant has produced no evidence to support the argument that there can be no alter ego liability. Contrary to Defendant’s assertions, the complaint does allege alter ego liability. The complaint alleges that Plaintiff is informed and believes and thereon alleges that some of the limited liability companies, and entities named as Defendants herein, including but not limited to Zumaworks, and DOES 1 through 10 (hereinafter occasionally collectively referred to as the "Alter Ego LLC"), and each of them, were at all times relevant the Alter Ego LLC of individual Defendants by reason of the following:

a. Plaintiff is informed and believes and thereon alleges that, at all times herein mentioned, there existed and now exists a unity of interest and ownership between Defendants and the Alter Ego LLC, such that the individuality and separateness of said individual Defendants and the Alter Ego LLC has ceased.

b. Plaintiff is informed and believes and thereon alleges that, at all times herein mentioned, the Alter Ego LLC was organized by said Defendants as a device to avoid individual liability and for the purpose of substituting financially irresponsible limited liability companies in the place and stead of said individual Defendants and accordingly the Alter Ego LLC was formed with capitalization totally inadequate for the business in which said limited liability company was engaged.

c. By virtue of the foregoing, adherence to the fiction of the separate legal existence of the Alter Ego LLC would, under the circumstances, sanction a fraud and promote injustice in that Plaintiff would be unable to realize upon any judgment in its favor. (Complaint, ¶ 8.)

As such, the Court finds that Court finds that Defendant has failed to present evidence that there can be no alter ego liability, such that that there is a reasonable possibility that he will prevail. The motion for an undertaking is therefore denied without prejudice.

Conclusion

Accordingly, Defendant’s motion for an undertaking is DENIED without prejudice.

Moving party is ordered to give notice.