Judge Nathan Vu, Case 2020-01169974 2022-09-12 Tentative Ruling

Judge: Nathan Vu, Case: 2020-01169974, Date: 2022-09-12 Tentative Ruling

Motion to Strike

The motion to strike of Defendants Redondo Investment Company and Christopher Vella is DENIED.

Defendants Redondo Investment Company and Christopher Vella (Landlord Defendants) move to strike the ninth cause of action and a portion of prayer for relief paragraph 5 from the Third Amended Complaint (TAC).

Pursuant to Civil Procedure Code section 436 the court may upon motion made by the parties, 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.” (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike must appear on the face of the pleading or from matters which the court may judicially notice. (Code Civ. Proc., § 437.)

Following an order sustaining a demurrer, the plaintiff may amend the complaint only as authorized by the court. The plaintiff may not amend the complaint to add a new cause of action without obtaining permission to do so, except when the new cause of action is within the scope of the order granting leave to amend. (Harris v. Wachovia Mortg. (2010) 185 Cal.App.4th 1018, 1023; see Community Water Coalition v. Santa Cruz County Local Agency Formation Com. (2011) 200 Cal.App.4th 1317, 1329 [trial court's grant of leave to amend in order to incorporate legislative history of statute at issue did not allow plaintiff to add new cause of action, naming new defendant, and alleging facts unrelated to interpretation of statute].)

Landlord Defendants assert that by adding the ninth cause of action, Plaintiffs have amended the complaint in a manner not authorized by the court.

The Second Amended Complaint (SAC) alleged that all Defendants were part of a fraudulent scheme to sell a worthless franchise to Plaintiffs by inducing them with misrepresentations. (See SAC, ¶¶ 12-37.) For example, the SAC plead that the Defendants made misrepresentations regarding the accuracy of the financial statements provided; the profitability of the restaurant; and that there were no defects in the restaurant premises or furniture, fixtures & equipment, and no undisclosed business issues; and that Defendant Cutting Concepts Corporation had a valid interest in the lease. (See SAC, ¶ 102(1)-(4).)

On 05/09/2022, the court sustained with leave to amend the demurrer to the third and fourth causes of action, which had alleged fraudulent and negligent inducement, respectively, against all the Defendants. The court ruled that: “the SAC fails to allege with specificity facts supporting any fraud claim, instead alleging generally that three individuals collectively made false representations over a three-month period.”

In response to the court’s ruling, the TAC separated the alleged misrepresentations plead in the SAC to specify which defendants made which misrepresentations. The third and fourth causes of action were asserted against the Landlord Defendants and the seventh and eighth causes of action were asserted against Defendants Ted Cutting, Jennifer Callueng, and Cutting Concepts Corporation (as a corporation and as a partnership) (collectively, Seller Defendants).

The TAC also added an aiding and abetting claim (ninth cause of action) against all Defendants. The new cause of action alleges that, “Defendants knew that fraud was being committed by Ted Cutting against Plaintiffs” and that “Defendants gave substantial assistance to Ted Cutting.” (TAC, ¶ 215.)

This does nothing more than make clearer what had already been pled in the SAC – that as part of a coordinated scheme, each defendant was aware of the falsity of the alleged misrepresentations made by the other defendants and each assisted in the alleged fraud or negligent inducement.

For example, the SAC alleged that Landlord Defendants confirmed or failed to deny the misrepresentations of others. (See SAC, ¶¶ 27, 98-100 & 104; see also SAC, ¶ 22 [“On or about, April 10, 2019, Ted Cutting individually and on behalf of Cutting Concepts Corporation (corporation), with the knowledge and consent of Redondo(Craig and/or Julie Langset) and Vella, provided fabricated financial statements and other records to ACE showing historic annual net income of at least $210,000.00 per year.”].)

The SAC also alleged that all Defendants were part of a fraudulent scheme to sell a worthless franchise to Plaintiffs by inducing them with misrepresentations. (See SAC, ¶¶ 12-37; see also SAC, ¶ 18 [“During 2019, Ted Cutting on behalf of Cutting Concepts Corporation (the corporation) approached Redondo (Craig and/or Julie Langset) and/or Vella with a scheme to resell the worthless Anaheim Slater's restaurant franchise for hundreds of thousands of dollars.”].)

In sustaining the demurrer to the SAC, the court required the Plaintiffs to specify which defendants made which alleged misrepresentations. Thus, it was also within the scope of the court’s leave to amend that Plaintiffs specify which defendants had knowledge of the falsity of which alleged misrepresentations.

Finally, the Landlord Defendants show no prejudice by this amendment and the court is not able to discern any as the fundamental allegations of the complaint remain the same.

Plaintiffs shall give notice of this ruling.