Judge Ralph C. Hofer, Case 22BBCV00991 2023-04-28 Tentative Ruling

Plaintiff Gewo Khachadoorian alleges that in March of 2020 plaintiff commenced a boyfriend-girlfriend relationship with defendant Talin Mouradian, who was working at a drug and alcohol rehabilitation facility. Defendant Mouradian represented that she was an expert and well-informed on operating a rehabilitation business and suggested that they work together to establish such a business. Plaintiff agreed to explore the idea, and approached two childhood friends, defendant Norbeh Aboolian and defendant Fred Akopyan, concerning investing in the business.

In July of 2020, the parties agreed, and all signed an agreement that each of them was the owner of 25% of the new business venture. Plaintiff alleges that he initially invested sums totaling $35,000 in the business, and in place of further cash contribution paid defendant Mouradian’s personal expenses for six to eight months, at approximately $4,000 to $5,000 per month. Plaintiff alleges that defendant Mouradian did not contribute or invest any funds toward the new business venture but represented that her knowhow of the business would substitute for her contribution in the new business.

The parties located premises for the business and filed Articles of Incorporation with the Secretary of State on December 8, 2020 for the business Hillcrest Recovery, Inc., which business was named Hollywood Hills Recovery. Plaintiff and defendant Mouradian commenced fixing the physical location of the business, and obtained the necessary licenses, and the new business began functioning as an inpatient rehabilitation center. Plaintiff and defendant Mouradian physically worked at the new business, but defendants Aboolian and Akopyan did not, but continued to be engaged in their own trucking business.

The complaint alleges that the parties proceeded to hire staff, and begin promoting the business, and from July 2021 through July 2022, plaintiff attracted many patients to the business and the business received large sums of monies from insurance companies and patients, which plaintiff alleges are still maintained in the business bank accounts, for which plaintiff requires an accounting.

It is also alleged that in June of 2021, plaintiff and defendants established an outpatient recovery center, bringing in defendant Phillip (“Chill”) Aguilar, who was knowledgeable about outpatient recovery systems. Articles of Incorporation and a Statement of Information were filed for Studio 64 Recovery, the same as defendant Greatest Recovery, naming defendant Aguilar as the president, defendant Mouradian as the secretary and plaintiff has one of the directors. The complaint alleges that this outpatient business is functioning and producing funds for the business owned by the parties in this case.

The complaint alleges that the relationship between plaintiff and defendant Mouradian declined, with the parties moving out of the apartment they shared and defendant Mouradian making threats to destroy plaintiff’s life. Plaintiff alleges that defendant Mouradian then took plaintiff’s social security card and credit cards and made unauthorized charges, causing his credit score to decrease, sent plaintiff insulting texts, attacked plaintiff’s companions, assaulted plaintiff, and hacked into plaintiff’s Google account.

Plaintiff alleges that plaintiff sought a restraining order against defendant Mouradian, and two days later defendant Mouradian filed a petition for restraining order against plaintiff, as a result of which the parties stipulated to a mutual restraining order directing each of them to stay away from the other by 100 yards. This restraining order prevents plaintiff from visiting the business premises and from attending to business affairs.

The complaint alleges that on the date defendant Mouradian filed the petition for a restraining order against plaintiff, defendants filed Articles of Incorporation for Hollywood Hills Recovery and for Greatest Care Center, removing plaintiff’s name as director or officer of those entities. It is also alleged that the defendant Mouradian caused damage to plaintiff’s vehicle.

Plaintiff alleges he has served the board of directors with formal notice demanding plaintiff be permitted access to the books and records, demanding that defendants provide notice of any sale, conversion, merger or transfer of any assets of the corporations, and calling a special meeting relating to the ownership interests of the shareholders. Defendants have not permitted the accounting, have refused to call for or attend board of director meetings, and have failed to distribute profits. Plaintiff alleges that the individual defendants, and specifically defendant Mouradian, have been guilty of or knowingly countenanced pervasive fraud, mismanagement, abuse of authorities and unfairness toward plaintiff, whose property is being misapplied.

Defendants Mouradian, Aboolian, Akopyan, Aguilar, Hillcrest Recovery Inc., and Studio 64 Recovery Inc. have filed a cross-complaint against plaintiff Khachadoorian, as cross-defendant, alleging that the individual parties entered into agreements with respect to the entity defendants Hillcrest Recovery and Studio 64 Recovery for the operation of substance use disorder and mental health treatment facilities. The cross-complaint alleges that based on the nature of the addiction treatment business, there was an implied agreement amongst the parties to maintain abstinence from drugs and alcohol, especially when they were physically present at the business premises. The cross-complaint alleges that all of the individual parties were in recovery from addiction or alcoholism themselves at the time the businesses commenced, and sobriety was mutually understood as a critical prerequisite for participating in the business.

The cross-complaint alleges that the beginning in September of 2021, cross-defendant Khachadoorian began acting erratically, so that business clients began reporting that cross-defendant appeared inebriated on site, and also that cross-defendant was developing inappropriate relationships with clients of the businesses. In March of 2022, cross-complainants requested, and cross-defendant agreed to submit a urine specimen for toxicology testing, which specimen tested positive for alcohol, marijuana, methamphetamines and benzodiazepines. It is alleged that when confronted with the drug test results, cross-defendant admitted to abusing drugs, and that he had stolen some of the drugs he was abusing from the businesses’ own medication disposal receptacles.

In March of 2022, cross-defendant voted unanimously with the individual cross-complainants to amend the bylaws of the corporate cross-complainants to have cross-defendant resign from all positions within the corporations, and to reflect their written agreement that any corporate shareholder would forfeit and fully relinquish their ownership interest if they failed to remain abstinent from marijuana, alcohol, non-prescribed pharmaceutical, and illegal drugs.

The cross-complaint alleges that cross-complainants paid for cross-defendant’s treatment and ongoing therapy, and supported cross-defendant in obtaining treatment, but cross-defendant left inpatient drug rehab early, and clients of the businesses observed cross-defendant’s old behaviors, causing cross-complainants to believe that cross-defendant continued to abuse drugs and alcohol through this period, and they ordered plaintiff to vacate the facility, determining his behavior was counter-productive to the recovery of the other residents. Cross-complainants allege that they tried to keep cross-defendant involved in the business by having him perform work off-site but discovered that cross-defendant had commenced a sexual relationship with a client of the businesses and had pressured the client to keep the event secret.

The cross-complaint alleges that cross-defendant’s actions jeopardized the licensure status and damaged the reputations of the businesses, causing drastic reductions in revenues and lasting financial repercussions, including the loss of clients.

Cross-complainants also allege that cross-defendant’s outside business dealings, pursuant to which cross-defendant became embroiled in a financial dispute related to a healthcare business run by cross-defendant’s mother, caused further compromise of the reputation and continued operation of the businesses. It is also alleged that cross-defendant continued to harass staff members and patients of the businesses when he encountered them at 12-step programs in the area, and during the course of hearings in the ongoing domestic dispute with cross-complainant Mouradian.

In September of 2022, cross-complainants formally requested that cross-defendant forfeit his ownership interests in accordance with the terms of the March amendments, in response to which cross-defendant filed suit against cross-complainants. At a December 20, 2022 meeting of the board of directors of both entities, cross-complainants cancelled cross-defendant’s stock in each corporation, and authorized payment of $20,000 from each corporation pursuant to the March amendments.

“(a) Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.

The Slavitt Declaration purports to be a declaration in support of automatic extension. The Declaration attaches a meet and confer letter, dated February 14, 2023, directed to the cross-complaint, although the Declarations submitted in support of the motion and automatic extension expressed counsel’s “dissatisfaction regarding Defendants’ answer,” and “the defects within the answer Defendants filed.” [See Declaration of Steven Slavitt, para. 4, and Exhibit 1, Declaration of Demurring or Moving Party in Support of Automatic Extension, para. 2]. These declarations address the answer and do not directly address the cross-complaint.

“Per California Code of Civil Procedure Section 431.41 (a), we would appreciate the opportunity to conduct a telephonic meet and confer to discuss any issues upon which you wish to demur, and your grounds for such a demurrer.”

“We wish to do everything in this case in writing and we will do so by sending you a detailed meet and confer letter containing any and all grounds for our demurrer. CCP 430 does not prohibit written meet and confer attempts. If we were to do it on the phone it would take a couple of hours and we do not wish to do so.”

These messages occurred before the February 14, 2023 correspondence directed to the cross-complaint was sent, and evidently pertain to the demurrer to the answer, which this court has already heard and determined. The opposition argues that on March 14, 2023, and March 29, 2023 cross-complainants requested to meet and confer telephonically regarding the cross-complaint. [See Opposition, p. 2:22-28]. These dates are not mentioned in the declaration filed in support of the motion. However, the declaration states that, “This counsel has made countless attempts to reach counsel for Defendant by telephone, but has never received a response, and has never spoken with counsel for Gewo Khachadoorian.” [Blackmar Decl., para. 6].

This statement is concerning, as the court at the hearing on the demurrer to the answer, conducted on March 24, 2023, pointed out that the language of the statute requires a meet and confer to be conducted in person or by telephone.

The court recognizes that it could refuse to hear the matter until an appropriate meet and confer has been conducted, in effect, continue the matter and require the parties to further meet and confer. The court in the circumstances before it finds that requiring a further meet and confer would waste judicial resources and the court proceeds to consider the demurrer on its merits at this time. Plaintiff and cross-defendant’s counsel is again cautioned, however, that during this litigation this court will expect full compliance with all statutes, rules and procedures governing the action.

Cross-complainants also argue that the demurrer is untimely because the declaration in support of the automatic extension to file the demurrer addressed only defects in the “answer” filed, and did not address the cross-complaint, and did not explain the reasons why the parties could not meet and confer in person or by telephone.

“(2) The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.”

The file includes a Declaration of Demurring or Moving Party in Support of Automatic Extension, filed on February 15, 2023, which checks the box that Khachadoorian was served with “a cross-complaint” in this action. [Declaration, para. 1]. The Declaration indicates that the reasons why the parties could not meet and confer are that:

letter on Febryary [sic] 15, 2023 pursuant to Code of Civil procedure Section 430.41, outlining the defects with the answer Defendants’ [sic] filed. The answer is defective in reference to each affirmative defense stated in that they are uncertain and lack any facts to support any of them and filed in bad faith.”

The declaration addresses the answer and affirmative defenses, but does not address the cross-complaint or explain why the parties could not meet and confer on that pleading, giving rise to an automatic extension.

This conduct is sloppy practice, as there is no reference to the cross-complaint which is the subject of this demurrer, and the court remains concerned that before the meet and confer correspondence referenced was served, on February 7, 2023, plaintiff/cross-defendant had received a request from cross-complainants for a meet and confer by telephone, and had refused it. [See Blackmar Decl., Exs. A, B]. The explanation in the declaration in support of the automatic extension does not appear to offer the complete facts concerning the representation that the parties were unable to meet and confer in time. The court would be within its discretion to decline to accept the representations in the Declaration in Support of Automatic Extension, find there cross-defendant failed to perfect entitlement to a 30-day automatic extension, and overrule the demurrer to the cross-complaint as untimely. However, the court exercises its discretion to consider the demurrer on its merits.

To plead a breach of fiduciary duty, a pleading must allege the existence of a fiduciary or confidential relationship, the breach of a duty arising under this relationship and resulting damages. Richelle L. v. Roman Catholic Archbishop of San Francisco (2003) 106 Cal.App.4th 257, 272.

Cross-defendant argues that the cross-complaint fails to allege facts identifying any specific conduct which amounts to a breach of fiduciary duty, and the cross-complaint fails to allege that cross-defendant or any members of the board or officers of the corporation owed fiduciary duties to the organization.

As argued in the opposition, under Corporations Code section 309(a), corporate officers and executives have a fiduciary duty of due care and loyalty to the corporation as well as to the other officers, executives and shareholders of a corporation.

“(a) A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.”

A corporate fiduciary owes a duty to the corporation to protect the interests of the corporation committed to his charge, and to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skills and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. Bancroft-Whitney Co. v. Glen (1966) 64 Cal. 2d 327, 345.

The cross-complaint here alleges that cross-defendant Khachadoorian was a director of both entity cross-defendants and was also an officer (Secretary) of Hillcrest from December 8, 2020, through March 19, 2022, and that the individual cross-complainants were also shareholders, officers and or directors of the entity defendants. [Cross-complaint, paras. 13, 14, 17, 36]. This recitation is sufficient to allege the existence of a fiduciary duty. As pointed out in the opposition, the argument in the demurrer appears a bit disingenuous, as cross-defendant as plaintiff in the complaint alleges the existence of a fiduciary relationship between the parties. [See Complaint, paras. 109-110].

The cross-complaint alleges numerous instances of cross-defendant breaching such fiduciary duties of due care and loyalty, by, among other conduct, appearing intoxicated while on the premises, harassing the entities’ client on-line, admitting the theft of drugs cross-defendant was abusing from the entity defendants’ medication disposal receptacles, and commencing and then covering up a sexual relationship with a client. [Cross-complaint, paras. 28-35, 45]. The cause of action itself lists numerous instances of such conduct, and alleges that cross-defendant’s acts were not in the best interest of Hillcrest and Studio 64, and have exposed cross-complainants to liability before accrediting agencies, and State Regulators. [Cross-Complaint, paras. 67, 68]. It is alleged that as a result cross-complainants have suffered damages, and that the conduct and acts of cross-defendant were a substantial factor is causing the harm. [Cross-Complaint, para. 68].

It is also argued that the dates when cross-defendant allegedly performed acts in breach of his fiduciary duty are insufficiently alleged. There is no legal authority cited under which a heightened level of detail, including the inclusion of dates, is required when pleading breach of fiduciary duty.

Moreover, the cross-complaint consistently alleges dates sufficient to apprise cross-defendant of what is being alleged, and during what time period. For example, it is alleged that clients began reporting that cross-defendant seemed intoxicated while on the property in “December of 2021,” that a specimen was submitted for toxicology testing on or around “March 10, 2022,” and that in July of 2022, Khachadoorian sought to intimidate a client with whom he had had a sexual relationship. [Cross-Complaint, paras. 33, 34, 49]. It is hard to imagine at the pleading stage a more detailed description of conduct with respect to dates of occurrence.

“Intentional interference with prospective economic advantage has five elements: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant's action.

b) Defendant knew of the relationship and was aware or should have been aware that it if did not act with due care, its actions would interfere with the above-mentioned relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship.

d) Such negligent conduct caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected

Cross-defendant argues that the causes of action are improper because the cross-complaint alleges that cross-defendant ceased to participate in the organizations in March 2022, and the parties then executed an agreement which modified the terms of the parties’ relationship with drugs and alcohol, and cross-complainants are now bringing claims for actions prior to the March 2022 modification. Cross-defendant argues that cross-complainant have waived any such claims and elected their remedy in contract for liquidated damages, which are not likely to prove reasonable.

There is no legal authority cited under which cross-complainants must elect a remedy at the pleading stage of this action, and cannot pursue both a breach of contract claim and interference claims. Under the liberal rules of pleading, parties are permitted to plead duplicative, alternative, or even inconsistent causes of action. See Jackson v. County of Los Angeles (1997, 2nd Dist.) 60 Cal.App.4th 171, 177, 180; Adams v. Paul (1995) 11 Cal.4th 583, 593 (“a party may plead in the alternative and may make inconsistent allegations.”)

Moreover, the argument itself appears to suggest the propriety of cross-complainants pursuing various theories, as cross-defendant suggests that the contractual remedies are subject to defense that the liquidated damages clause is unreasonable, in which case, non-contractual remedies would be appropriately pursued in the alternative.

As argued in the opposition, election of remedies is an affirmative defense that may be raised in an answer to a complaint but does not appear to be a valid basis for demurrer. In Steiner v. Rowley (1950) 35 Cal.2d 713, the California Supreme Court held that a party could not be held to have elected a remedy at the pleading stage because inconsistent pleading is permissible, “and an election cannot be forced by demurrer.” Steiner, at 720, citation omitted.

It is recognized that “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371, quoting Restatement 2nd Contracts, §205.

Cross-defendant does not argue that the cross-complaint fails to allege any particular element, but argues briefly that the allegations must be disregarded as superfluous as they do not go beyond the statement of a mere contract breach and rely on the same acts already claimed in the breach of contract cause of action.

It has been held that a demurrer may be sustained as to a claim for breach of implied covenant which duplicates a breach of contract claim. Careau & Co. v. Security Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.

Here, the cross-complaint alleges in both the breach of contract and breach of implied covenant causes of action that the agreements between the parties required cross-defendant Khachadoorian to abstain from the use of specified mind-altering substances, and in the breach of implied covenant cause of action also alleges that cross-defendant was required to not engage, “in conduct that would interfere with or adversely impact the recovery of patients and clients…” [Cross-Complaint, para. 109].

It is alleged in the implied covenant cause of action that cross-defendant not only began using illegal drugs, but engaged in a sexual relationship with a client, which conduct does not appear to be alleged to breach any express terms of the contracts between the parties. [Cross-Complaint, para. 11]. In addition, as pointed out in the demurrer to the cross-complaint itself, the cross-complaint quite clearly alleges that an express provision prohibiting conduct with respect to the use of substances was not added to the Bylaws until March of 2022, so prior to that time, any alleged breaches of such a restriction are properly alleged to have been a breach of an implied term of the parties’ agreement. [Cross-Complaint, paras. 36, 38, Ex. A].

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