Maguire Partners – 17th & Grand, LLC v. Stockdale Capital Partners, LLC et al.

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

 

MOVING PARTY: Defendants Stockdale Capital Partners, LLC; Stockdale Acquisitions, LLC; and SCP Grand Avenue, LLC

RESPONDING PARTY(S): Plaintiff Maguire Partners – 17th & Grand, LLC

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff Maguire Partners – 17th & Grand, LLC (“Maguire”) owned a parking garage (“the property”) in downtown Los Angeles under a ground lease between Maguire, as ground lessee, and the Los Angeles Unified School District (“LAUSD”), as ground lessor.  Plaintiff explored a joint venture with Defendants [FN 1] with respect to the property.  In connection with the negotiations, Plaintiff required that Defendants execute confidentiality agreements in 2017 and 2018.  The confidentiality agreements limited Defendants’ use of Maguire’s confidential information to the contemplated joint venture. 

In late 2019, Plaintiff obtained a $20.2 million dollar loan (“the Mosaic Loan”) from Mosaic DTLA Parking, LLC (“Mosaic”), secured by an interest in the property.  Once the Covid-19 pandemic hit, Plaintiff could no longer pay rent to LAUSD, or loan principal payments to Mosaic.  Accordingly, Mosaic apparently paid the outstanding rents to LAUSD for Plaintiff and tacked on the amounts paid to the principal balance on the Mosaic Loan.  At some point, Defendants and Plaintiff renewed discussions regarding a joint venture on the property, and the parties executed a third confidentiality agreement in February 2021.  Plaintiff alleges that Defendants then used this confidential information to purchase the Mosaic Loan from Mosaic.  Defendants, now owning the Mosaic Loan and all beneficial interest of the Deed of Trust for the property that secured the loan, initiated public foreclosure proceedings against the property in June 2021.  Eventually, Plaintiff alleges it sold the property to Dignity Community Care (“Dignity”) but had to make concessions as a result of Defendants’ interference and use of confidential information.

Plaintiff brings causes of action against Defendants for (1) breach of confidentiality agreements, (2) breach of loan agreement, (4) intentional interference with contractual relations, (5) intentional interference with prospective economic relations, (6) unfair business practices in violation of Cal. Bus. & Prof. Code section 17200 et seq. [FN 2]

Defendants now move for summary judgment, or in the alternative, summary adjudication. Plaintiff opposed.

TENTATIVE RULING:

Defendants’ Motion for Summary Judgment is DENIED.

Defendants’ Alternative Motion for Summary Adjudication of the First Cause of Action is DENIED.

Defendants’ Alternative Motion for Summary Adjudication of the Second, Fourth, Fifth, and Sixth Causes of Action is GRANTED.

Moving party to give notice.

DISCUSSION:

Motion for Summary Judgment or Adjudication

I. Judicial Notice

Pursuant to Plaintiff’s request, the court takes judicial notice of Exhibits 1 and 2.

II. Evidentiary Objections

The parties’ evidentiary objections are not numbered, as is required under Rules of Court Rule 3.1354. Therefore, the court refers to the objections by the paragraph in the declarations at which they appear.

Pursuant to CCP § 437c(q), this court rules only on objections material to the disposition of this motion, as follows:

Plaintiff’s objections to the declaration of Earl Kreiser at ¶¶ 9, 12, 13, 14 are OVERRULED.

Plaintiff’s objections to the declaration of Dan Michaels at ¶¶ 16, 17, 18, 21, 22 are OVERRULED.

Plaintiff’s objections to the declaration of Suman Alagappan at ¶¶ 25, 26, and 28 are OVERRULED.

Defendants’ objections to the declaration of Steve Mlynarczyk at ¶¶ 53, 54, to the extent he attempts to interpret the eviction moratoria, are SUSTAINED as improper legal conclusions. (Evid. Code § 310.) 

Defendants’ objections to the Mlynarczyk declaration at ¶¶ 71, 73, 89, 91, 93, 94, and 95 are OVERRULED.

III. Legal Standard

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843. In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.  Thus, summary judgment is granted when, after the Court’s consideration of the evidence set forth in the papers and all reasonable inferences accordingly, no triable issues of fact exist and the moving party is entitled to judgment as a matter of law.  Code Civ. Proc. § 437c(c); Villa v. McFarren (1995) 35 Cal.App.4th 733, 741. 

As to each claim as framed by the Complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520. Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389. A defendant has met its burden of showing that a cause of action has no merit if it demonstrates the absence of any single essential element of plaintiff’s case or a complete defense to plaintiff’s action.  Code Civ. Proc. § 437c(o)(2); Bacon v. Southern Cal. Edison Co. (1997) 53 Cal.App.4th 854, 858.  Once the defendant moving party has met the burden, the burden shifts to the plaintiff to show via specific facts that a triable issue of material facts exists as to a cause of action or a defense thereto.  § 437c(o)(2). 

IV. Analysis

In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)

“A defendant moving for summary judgment has the initial burden of showing, with respect to each cause of action set forth in the complaint, the cause of action is without merit. A defendant meets that burden by showing one or more elements of the cause of action cannot be established, or there is a complete defense thereto.” (Leyva v. Garcia (2018) 20 Cal. App. 5th 1095, 1101.) “A prima facie showing is one that is sufficient to support the position of the party in question. [Citation.] No more is called for.” (Aguilar v. Atl. Richfield Co. (2001) 25 Cal. 4th 826, 851 [emphasis added].) “The prima facie showing by the moving party must be such that it would, if uncontradicted, entitle the moving party to judgment as a matter of law.” (Id. at 851.) That is, “a moving defendant must present evidence which, if uncontradicted, would constitute a preponderance of evidence [i.e., show it is more likely than not] that an essential element of the plaintiff's case cannot be established.” (Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870, 879.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389.)

A. First Cause of Action for Breach of Confidentiality Agreements

1. Breach Element

Defendants first argue that Plaintiff cannot establish a breach of the Confidentiality Agreements because it cannot establish that Defendants improperly used the confidential information. Breach of contract requires “(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (D'Arrigo Bros. of California v. United Farmworkers of Am. (2014) 224 Cal. App. 4th 790, 800.)

As framed by the Complaint, Plaintiff alleges that Defendants breached the 2017, 2018, and 2021 Confidentiality Agreements by “us[ing] the Confidential Information outside of the purposes of the Confidentiality Agreements.” (FAC ¶ 66.) Defendants used the “Confidential Information” in “buying Maguire’s mortgage loan from Mosaic, attempting to force Maguire to agree to Stockdale’s terms under threat of foreclosure, using a foreclosure to thwart Maguire’s ability to sell the Property to anyone else, including Dignity, and attempting to acquire the Property through foreclosure.” (Id. ¶ 67.)

First, as raised by Defendants, the 2017 and 2018 Confidentiality Agreements only prevent the disclosure of confidential information, but not the use of confidential information. Nowhere in the First Amended Complaint does Plaintiff allege that Defendants disclosed any confidential information. In a summary judgment proceeding, the complaint “delimit[s] the scope of the issues” and “frame[s] the outer measure of materiality.” (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.)  [FN 3] Be that as it may, “[a] motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (CCP § 437c(f)(1).)

Therefore, the focus of the breach is on the 2021 Confidentiality Agreement. That Agreement provides that Defendants could “not use [Maguire’s] Confidential Information, or permit it to be accessed or used, for any purpose other than the Purpose and any related transaction between the Parties.” (See “2021 Confidentiality Agreement,” Plaintiff’s Exh. 10, ¶ 3(c) [emphasis added].) 

Defendants deny any breach of the agreement—an essential element of the claim—because Stockdale’s Investment Committee “did not consider any confidential information when deciding to acquire the Mosaic Loan.” (Mtn. 18: 14-15.) “Put simply, Stockdale purchased the Mosaic Loan because it received a deep discount relative to the face value of the loan”—not because of any purported confidential information provided by Maguire. (Mtn. 18:18-19.)

At least as early as late 2017, Plaintiff and Defendants began talks of a joint venture to develop 17th & Grand. (SSUMF 1.) As part of the discussions, the parties executed confidentiality agreements on December 17, 2017, February 1, 2018, and February 18, 2021. (SSUMF 1, 2, 6.) 

After Plaintiff and Defendants executed the 2017 and 2018 confidentiality agreements—but prior to the 2021 agreement—Plaintiff and third-party Mosaic entered into a loan agreement on June 26, 2019 (the “Mosaic Loan Agreement”). Mosaic recorded a deed of trust indicating that the $20.2 million Mosaic Loan was secured by 17th & Grand (the “Mosaic Deed of Trust”). (SSUMF 10.) 

Later, Defendants acquired the Mosaic Loan from Mosaic. Defendants present evidence that they did not use any of Maguire’s confidential information in deciding to acquire the Mosaic Loan. Defendants submit a declaration from Dan Michaels, the Managing Partner of Stockdale Capital. (See Compendium of Evidence, Exh. 3, ¶ 1.) Along with three others, Michaels serves on Stockdale’s Investment Committee, who are “the decision-makers when it comes to acquiring loans and property.” (Michaels Decl. ¶ 4.) 

In early 2021, Stockdale entered into discussions with Mosaic concerning Mosaic's desire to sell four or five distressed loans, one of which was the Mosaic Loan on 17th & Grand. (Id. ¶ 17.) From Michaels’ perspective, “the decision to acquire the Mosaic Loan was straightforward and simple.” (Id. ¶ 18.) “Stockdale was able to acquire the Mosaic Loan at a substantial discount.” (Id.) Michaels viewed it as a win-win: he “knew that if Maguire paid off the Mosaic Loan, Stockdale would make a substantial profit. If Stockdale needed to foreclose, it had the experience necessary to operate the parking structure and possibly even redevelop some of the property.” (Id. ¶ 19.) 

Michaels maintains that the Investment Committee “did not discuss, use, or rely on Maguire's ‘confidential information’ when deciding to acquire the Mosaic Loan.” (Id. ¶ 21.) The information provided in Maguire’s “data room”  [FN 4] was not “valuable” or considered. (Id. ¶¶ 21, 24.) Whether to acquire the Mosaic Loan was “an entirely different analysis” than the one used to assess a joint venture between Maguire and Stockdale. (Id. ¶ 22.) The joint venture “never got off the ground.” (Id.)

Defendant also submits a declaration from Suman Alagappan, a Managing Director at Stockdale. (Compendium of Evidence, Exh. 4, ¶ 1.) Alagappan states he reviewed the documents contained in the Maguire Data Room. (Id. ¶ 16.) Algappan is not on the Investment Committee. (Id. ¶ 38.) He maintains that he did not use the confidential information, and “did not brief the [Investment Committee] on Maguire’s pre-development plans.” (Id. ¶¶ 39, 41.) 

“A prima facie showing is one that is sufficient to support the position of the party in question. [Citation.] No more is called for.” (Aguilar v. Atl. Richfield Co. (2001) 25 Cal. 4th 826, 851 [emphasis added].) “The prima facie showing by the moving party must be such that it would, if uncontradicted, entitle the moving party to judgment as a matter of law.” (Id. at 851.) That is, “a moving defendant must present evidence which, if uncontradicted, would constitute a preponderance of evidence [i.e., show it is more likely than not] that an essential element of the plaintiff's case cannot be established.” (Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870, 879.)

Considering the evidence presented by Defendants, this Court finds that Defendants have met their initial burden to demonstrate that Plaintiff cannot establish a breach of confidentiality agreements, because Defendants did not use information covered by the agreements. This shifts the burden to Plaintiff to establish a triable issue of material fact.

Plaintiff asserts that it provided this information confidentially to Defendants in connection with the potential joint venture. Defendants, however, eventually included this information in a May 2021 investment memorandum prepared by the deal team and presented to the Investment Committee. (Id.) Plaintiff contends the Investment Committee relied on this memorandum in choosing to acquire the Mosaic Loan. Therefore, Plaintiff contends “[i]n light of Stockdale’s admitted reliance on the May 2021 Investment Memorandum, and the comprehensive Confidential Information contained therein, Stockdale fails to establish that there are no triable issues of fact with respect to the breach of Confidentiality Agreements claim.” (Opp. 25: 11-15.)

On this record, a reasonable trier of fact could conclude that the Investment Committee used the confidential information contained in the investment memo. Therefore, Plaintiff has established a triable issue of material fact on breach.

2. Harm/Damages from Breach

Plaintiff alleges it was forced to “deliver additional substantial concessions to Dignity due to the acute threat of a foreclosure being asserted by Stockdale against the Property.” (Id. ¶ 68.) As damages, Plaintiff seeks “not less than $6,651,032.69” in disgorgement or restitution from Defendants, which reflects Stockdale’s “receipt of interest, default interest, late fees, exit fees, servicing fees, and principal received in excess of the price paid by Stockdale for the Mosaic Loan.” (Id. ¶ 71.) 

Defendants argue that Plaintiff did not suffer any legally cognizable harm. However, Plaintiff presents evidence from Steve Mlynarczyk, Plaintiff’s VP and Chief Financial Officer during the relevant period. Mlynarczyk attests in his declaration that “after Stockdale recorded the NOD, Dignity ultimately insisted that Maguire pay for repairs and remediation of certain conditions on the Property. As a result of the NOD and threat of foreclosure, Maguire needed dignity to sign the PSA in order to start the time periods for closing. Thus, Maguire acceded to Dignity’s demand.” (P’s Compendium of Evidence, Exh. 1, Mlynarczyk Decl. ¶ 93.) 

In addition, “as a result of the foreclosure initiated by Stockdale, Maguire was forced to terminate its lease agreement with L&R on a more accelerated time frame. This necessarily compelled Maguire to forgo any lease end negotiations with L&R regarding outstanding amounts owed, such that Maguire forgave substantial rental arrears to which it otherwise would have been entitled.” (Id. ¶ 94.) Mlynarczyk maintains that “Maguire would not have provided these concessions if the Property was not at risk of being foreclosed upon by Stockdale.” (Id. ¶ 95.) 

Therefore, Plaintiff has established a triable issue as to whether it suffered harm. Finally, contrary to Defendants’ contention, there is no authority suggesting that Plaintiff “waived” its harm by moving forward with the Dignity deal.

3. Whether Disgorgement is an Available Remedy

Plaintiff alleges that “Stockdale Capital and Stockdale Acquisitions were unjustly enriched by breaching the Confidentiality agreements…thereby entitling Maguire to disgorgement and restitution of said amount to Maguire.” (FAC ¶ 71.)

Defendants argue that Plaintiff is not entitled to disgorgement as a contract remedy.

Disgorgement is a broader remedy than restitution. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1145.) “Unjust enrichment is an equitable principle that underlies various legal doctrines and remedies.” (Cnty. of San Bernardino v. Walsh (2007) 158 Cal. App. 4th 533, 542.) “Typically, the defendant's benefit and the plaintiff's loss are the same, and restitution requires the defendant to restore plaintiff to his or her original position.” (Id.) “The principle of unjust enrichment, however, is broader than mere ‘restoration’ of what the plaintiff lost. Many instances of ‘liability based on unjust enrichment ... do not involve the restoration of anything the claimant previously possessed ... includ[ing] cases involving the disgorgement of profits ... wrongfully obtained....’” (Id.) Where “a benefit has been received by the defendant but the plaintiff has not suffered a corresponding loss or, in some cases, any loss, but nevertheless the enrichment of the defendant would be unjust ... [t]he defendant may be under a duty to give to the plaintiff the amount by which [the defendant] has been enriched.” (Id.) 

“California law recognizes a right to disgorgement of profits resulting from unjust enrichment, even where an individual has not suffered a corresponding loss.” (In re Facebook, Inc. Internet Tracking Litig. (9th Cir. 2020) 956 F.3d 589, 599; see Foster Poultry Farms, Inc. v. SunTrust Bank (9th Cir. 2010) 377 F. App'x 665, 669 [disgorgement was proper remedy where plaintiff “did not get the benefit of the bargain of the confidentiality agreement” and defendant misused the information “for its own profit”].)

In Ajaxo Inc. v. E*Trade Grp. Inc. (2005) 135 Cal. App. 4th 21, 56–57, the Court of Appeal held disgorgement through unjust enrichment was the proper measure of damages for the breach of a confidentiality agreement. The Court explained: 

Here, assuming that E*Trade had performed on the NDA, i.e. had kept Ajaxo's trade secrets and proprietary information confidential, Ajaxo would have been in exactly the same position before it entered into the NDA as it would have been after negotiations broke down, except it would have kept its trade secrets and proprietary information away from Everypath. Ajaxo conferred a benefit on E*Trade by giving E*Trade Ajaxo's trade secrets and proprietary information because, ultimately, E*Trade received technology from Everypath that helped to keep it competitive. Thus, E*Trade was benefited by breaching the NDA. Accordingly, Ajaxo must be “compensated” for E*Trade's breach of the NDA, i.e. by E*Trade disgorging its unjust enrichment.

(Id.)

While the foregoing authorities are not identical to the facts here, they are instructive. Therefore, Defendants have failed to establish that unjust enrichment or disgorgement are not available as a measure of Plaintiff’s damages for breach of the confidentiality agreement.

Accordingly, Defendants’ Motion for Summary Adjudication of the First Cause of Action is DENIED.

B. Second Cause of Action for Breach of Loan Agreement

Plaintiff alleges that Maguire fell behind in ground lease rent to LAUSD once the COVID-19 pandemic struck.  (FAC ¶ 76.)  Plaintiff further alleges it had the protection of the Los Angeles City and County eviction moratoria during this time.  (Id.)  Plaintiff alleges the moratoria excused it from covenants in the Mosaic Loan documents requiring Plaintiff to remain current on its ground lease rent, and that LAUSD never issued a issued any notice of default.  (Id.)  However, Plaintiff alleges that Mosaic paid the outstanding ground lease rents in breach of the mosaic loan documents.  (Id. ¶ 78.)  Mosaic then allegedly added the amounts paid to LAUSD to the principal balance of the Mosaic Loan.  (Id. ¶ 79.)

The Deed of Trust on the Mosaic Loan permits Mosaic—Defendants’ predecessor-in-interest—to make “protective advances” under a variety of circumstances.  (See FAC Exh. 3, ¶ 10(a).) This includes protective payments for “installments of principal, interest or other obligations in accordance with the terms of any prior lien” when such become due, and “expenses incurred and expenditures made…pursuant to any Lease or other agreement for occupancy of the Mortgaged Property.” (FAC Exh. 3, ¶ 10(a)(ii),(viii).) If an event triggered Mosaic to pay a “protective advance,” it became an additional obligation of Plaintiff due and payable under the Mosaic Loan.  (See FAC Exh. 3, ¶ 10(b).)  

Thus, Plaintiff’s theory in this cause of action is that because it was protected by the eviction moratoria—and lessor LAUSD never issued a notice of default on the lease—Defendants (through Mosaic) breached the Loan Agreement by making the protective advance anyway. By tacking that amount on to the principal of the Mosaic loan, Plaintiff incurred an additional $43,000 in interest it would not have otherwise had to pay.

First, Defendants argue that Plaintiff “has never identified which laws supposedly prevented Mosaic from making the Protective Payment or charging interest thereon. (Mtn. 27: 12-13.) “Nor has Maguire provided facts showing it has complied with any prerequisites to enjoying the protections of any such laws.” (Id. 13-14.) In any event, Defendants contend “Maguire never objected to repaying the Protective Payment or interest thereon,” despite advance notice that Mosaic intended to make the Protective Payment.

In opposition, Plaintiff first argues that Defendants could only make protective payments “before and during a foreclosure.” (Opp. 34: 1-2 [citing FAC Exh. 3, ¶ 10(a).) However, read in full, the Deed of Trust allows protective payments in range of circumstances, “whether before and during a foreclosure, and at any time prior to sale, and, where applicable, after sale, and during the pendency of any related proceedings.” (FAC Exh. 3, ¶ 10(a).) Thus, Plaintiff’s contention is without merit.

Next, Plaintiff argues the eviction moratoria “deferred indefinitely” its rental obligations under the Ground Lease, and therefore, it was improper for Mosaic to make a protective payment. Notably, Plaintiff does not discuss or cite any provisions of the moratoria. Instead, it merely directs the court to its request for judicial notice. Plaintiff has provided a copy of Ordinance No. 186606, enacted on May 6, 2020 (the “City Moratorium”), and Resolution of the Board of Supervisors of the County of Los Angeles Further Amending and Restating the Executive Order for an Eviction Moratorium During Existence of a Local Health Emergency Regarding Novel Coronavirus (COVID-19), adopted on November 10, 2020 (the “County Moratorium”). (See RJN, Exhs. 1 & 2.) 

Where, as here, a party raises a point but “fails to support it with reasoned argument and citations to authority,” a court can deem the argument waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.) Even if Plaintiff’s argument is not deemed waived, the court’s independent review of the Moratoria do not support Plaintiff’s position. 

The City Moratorium provides:

During the Local Emergency Period and for three months thereafter, no Owner shall endeavor to evict or evict a tenant of Commercial Real Property for nonpayment of rent during the Local Emergency Period if the tenant is unable to pay rent due to circumstances related to the COVID-19 pandemic.

…

Tenants shall have up to three months following the expiration of the Local Emergency Period to repay any rent deferred during the Local Emergency Period. Nothing in this article eliminates any obligation to pay lawfully charged rent. No Owner shall charge interest or a late fee on rent not paid under the provisions of this article.

(RJN, Exh. 1, Ordinance no. 186606, Art. 14.6, Sec. 49.99.3.)

The County Moratorium is similar, banning the eviction of commercial tenants “for nonpayment of rent, late charges, interest, or any other fees accrued if the Tenant demonstrates an inability to pay rent and/or such related charges due to financial impacts related to COVID-19.” (RJN Exh. 2, III(a)(1).) And of course, neither moratorium forgave rent payments—they only delayed them. 

The Moratoria did not eliminate the obligation to pay rent. They only banned evictions for the failure to do so. In other words, Plaintiff still owed rent to LAUSD for the ground lease as it became due‚ but LAUSD could not evict Plaintiff if it didn’t pay. 

C. Fourth Cause of Action for Intentional Interference with Contractual Relations & Fifth Cause of Action for Intentional Interference with Prospective Economic Relations

In support of its Fourth Cause of action for intentional interference with contract and Fifth Cause of Action for intentional interference with prospective economic relations, Plaintiff alleges that once Defendants acquired the Mosaic loan, Defendants interfered with the contract(s) or relationship between Plaintiff and Dignity by “using a foreclosure to thwart Maguire’s ability to sell the Property” to Dignity. (FAC ¶¶ 67, 92, 101.)

Defendants first argue their filing of a notice of default cannot constitute interference, because they had the contractual right to do so. At the time of the NOD, there were multiple defaults under the Mosaic Loan.

In opposition, Plaintiff argues the filing of the NOD “was a wrongful act in itself.” (Opp. 35: 4-5.) “Stockdale contends it had a right to do so pursuant to the terms of the Mosaic Loan, but ignores the fact that Stockdale obtained the Mosaic Loan in direct contravention of Maguire’s rights under the Confidentiality Agreements.” (Id. 4-6.)

Here, there is no evidence that Stockdale was wrong, unjustified, or mistaken in issuing a NOD when it is undisputed that Plaintiff was in default. (See Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal. App. 4th 464, 480 [“the exercise of contractual rights…is not wrongful conduct actionable as intentional interference”].) Put simply, Plaintiff has not established that the undisputed facts give rise to a tort claim. Plaintiff only highlights a breach of contract readily covered by the first cause of action.

Accordingly, Defendants’ Motion for Summary Adjudication of the Fourth and Fifth Causes of Action is GRANTED.

D. Sixth Cause of Action for Unfair Business Practices

Finally, Plaintiff alleges that Defendants’ use of its confidential information to acquire the Mosaic loan, followed by the threat of foreclosure, constitutes a violation of the UCL. (FAC. ¶ 107.)

Business and Professions Code section 17200 defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice....” “The scope of section 17200 is broad, encompassing ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ... It governs ‘anti-competitive business practices’ as well as injuries to consumers, and has as a major purpose ‘the preservation of fair business competition.’” [Citations.] (Linear Tech. Corp. v. Applied Materials, Inc., (2007) 152 Cal. App. 4th 115, 133).  Whether a practice violates the section “is generally a question of fact which requires ‘consideration and weighing of evidence from both sides.’” (Id.) 

First, Defendants argue there is no evidence of a violation of the UCL. However, the finding of a triable issue under the first cause of action also leads to question of unlawful or unfair business practices. 

Second, Defendants argue Plaintiff is not entitled to relief under the UCL. “Injunctive relief and restitution are the only remedies available under the UCL.”  (Esparza v. Safeway, Inc. (2019) 36 Cal. App. 5th 42, 53.)  Thus, “[a] UCL claim must be based on the existence of harm supporting injunctive relief or restitution.”  (Id.) Disgorgement of money obtained through an unfair business practice is an available remedy only to the extent that it constitutes restitution. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1145, 1148.) “[A]n order for restitution is one ‘compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person.’ [Citation].’ The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Id. at 1149.) 

As noted, Plaintiff is seeking restitution and disgorgement of over $6 million in Defendants’ profits on the Mosaic Loan. (FAC ¶ 71 and Prayer for Relief.) In opposition, Plaintiff now implies it is only seeking restitution for the accrued interest passed on to and paid by Maguire on the Mosaic Loan arising from the Improper Advance.

In other words, Plaintiff apparently concedes it is not entitled to restitutionary disgorgement of Defendants entire profits on the Mosaic loan. That’s because the “object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Korea Supply Co., supra, 29 Cal. 4th at 1149.) Plaintiff has no “ownership interest” in the vast majority of Defendants’ profit. It was never in Plaintiff’s possession to begin with.

Arguably, the small portion of the profit attributed to the accrued interest Plaintiff incurred by nature of Mosaic’s protective payment to LAUSD could be considered restitutionary in nature. However, this still requires that the payment of the protective payment be “unlawful, unfair, or fraudulent” in the first place. This court already discussed how Mosaic had the right to make the protective payment for Plaintiff. Therefore, doing so did not constitute breach of the Mosaic loan agreement, and likewise cannot constitute a violation of the UCL.

Accordingly, Defendants’ Motion for Summary Adjudication of the Sixth Cause of Action is GRANTED.

IT IS SO ORDERED.

Dated:   October 30, 2023 ___________________________________