Judge: Richard J. Burdge, Case: 19STCV05246, Date: 2023-02-14 Tentative Ruling
Case Number: 19STCV05246 Hearing Date: February 14, 2023 Dept: 37
HEARING DATE: February 14, 2023
CASE NUMBER: 19STCV05246
CASE NAME: Alexandria Real Estate Equities
and Joel Marcus v. Steven Marcus and Bugsby Property, LLC
TRIAL DATE: March 21, 2023
PROOF OF SERVICE: OK
MOTION: Plaintiffs’ Motion for Judgment on the
Pleadings
MOVING PARTIES: Plaintiffs, Alexandria Real Estate
Equities, Inc. and Joel S. Marcus
OPPOSING PARTY: Defendant, Steven Marcus
OPPOSITION: January 31, 2023
REPLY: February 6, 2023
TENTATIVE: Plaintiffs’
motion for judgment on the pleadings is granted. Defendant Steven is granted 30
days leave to amend only the Affirmative Defenses of the Answer. Plaintiffs are
to give notice.
Background
This is an action for declaratory relief arising out of the business
ventures of Plaintiffs Alexandria Real Estate Equities (“Alexandria”) and Joel
S. Marcus (“Joel”) with Defendants Steven Marcus (“Steven”) and Bugsby
Property, LLC (“Bugsby”).
Plaintiffs’ Complaint for declaratory relief filed February
13, 2019, alleges that in November 2013, Joel, in his capacity as Alexandria’s
CEO, asked Steven for “some suggestions” regarding Alexandria’s joint venture
financing. Steven and Joel allegedly agreed that Steven would not receive
monetary compensation but would be entitled to advertise the fact that he had
advised Alexandria. On December 27, 2013, Alexandria and Steven alleged entered
into a “Confidential Information and Nondisclosure Agreement” (“CNDA”) which
memorialized the terms of their agreement. The CNDA allegedly provided that
Steven would receive no compensation and allegedly included a merger clause
which provided that it would be the final and exclusive agreement between the
parties.
Steven allegedly completed his work advising Alexandria by
January 2014 and provided the work under the name of his corporation, Bugsby.
However, the Complaint alleges that Bugsby is an alter ego of Steven. The
Complaint alleges that over the years, Steven’s relationship with Joel
deteriorated and that in January 2019, Steven demanded $12 million in payment
for his advice, contrary to the terms of the CNDA. Joel and Alexandria seek an
order from the Court declaring that Steven and Bugsby are not owed compensation
under the CNDA.
On February 28, 2020, the court denied Steven’s motion to
quash service of summons. Bugsby’s motion to quash service of summons was
granted.
On April 9, 2020, Plaintiffs filed their First Amended
Complaint (“FAC”). The FAC now alleges five causes of action, as follows: (1)
fraud: intentional misrepresentation, (2) fraud: concealment, (3) breach of
contract, (5) breach of the implied covenant of good faith and fair dealing,
(5) declaratory relief.
On September 19, 2020, Steven filed a Cross-Complaint against
Alexandria, Joel, and Barbara Marcus (“Barbara”). Steven’s Cross-Complaint
alleged the following causes of action: (1) breach of contract against Joel and
Barbara, (2) breach of contract against Joel and Barbara, (3) breach of
contract against Alexandria, (4) breach of the covenant of good faith and fair
dealing against Alexandria, (5) extortion against Joel and Alexandria, (6)
intentional misrepresentation against Joel and Alexandria, (7) fraudulent
concealment against Joel and Alexandria, (8) declaratory relief against Joel
and Barbara, (9) declaratory relief against Alexandria, (10) unfair
competition against Joel and Alexandria.
On January 6, 2021, the court sustained Cross-Defendants’
demurrer to the Cross Complaint. On
February 5, 2021, Steven filed the operative First Amended Cross-Complaint.
(“FACC”) The FACC alleges the following cause of action: (1) breach of contract
against Joel/Barbara.
On June 17, 2021, the court sustained Joel and Barbara’s
demurrer to the FACC without leave to amend.
On August 25,
2021, Steven’s motion for summary judgment as to the FAC was denied in its
entirety.
Now, Plaintiffs
move for judgment on the pleadings as to Defendants’ affirmative defenses.
Defendant Steven opposes the motion.
Request for
Judicial Notice
Joel and Barbara request that the court take judicial notice
of the following in support of their demurrer:
1.
Plaintiffs’ Complaint for Declaratory Relief, filed
February 3, 2019 (Exhibit 1);
2.
Supplemental Declaration of Steven Marcus in support of
Motion to Quash, filed February 21, 2020 (Exhibit 2);
3.
Plaintiffs’ First Amended Complaint, filed April 4,
2020 (Exhibit 3);
4. Defendant
Steven Marcus’s Notice of Demurrer to First Amended Complaint; Demurrer; and
Memorandum of Points and Authorities, filed April 20, 2020 (Exhibit 4);
5. Notice
of Ruling on Steven Marcus’s Special Motion to Strike the First Amended
Complaint Pursuant to CCP § 425.16, Motion to Quash re Causes of Action One and
Two in the First Amended Complaint, and Demurrers to First Amended Complaint,
filed August 19, 2020 (Exhibit 5);
6. Defendant
Steven Marcus’s Answer and Crossclaims for Fraud, Breach of Contract, and
Declaratory Relief, filed September 8, 2020 (Exhibit 6);
7. Plaintiffs’
and Cross-Defendants’ Notice of Demurrers and Demurrers to Defendant’s
Cross-Complaint, filed October 13, 2020 (Exhibit 7);
8. Notice
of Ruling on Plaintiffs’ and Cross-Defendants’ Demurrers to Defendant and
Cross-Complainant Steven Marcus’ Cross-Complaint, filed January 6, 2021
(Exhibit 8);
9. Defendant
Steven Marcus’s Amended Crossclaims, filed February 5, 2021 (Exhibit 9);
10. Memorandum
of Points and Authorities in Support of Plaintiff’s and Cross-Defendants’
Demurrer to Defendant’s First Amended Cross-Complaint, filed March 8, 2021 (Exhibit
10);
11. Notice of
Entry Ordering Dismissal [sic] of Defendants’ Cross-Complaint Without
Leave to Amend, filed June 21, 2021 (Exhibit 11);
12. Notice of
Entry of Order Denying Defendant’s Motion for Summary Judgment, issued August
25, 2021 (Exhibit 12);
13. Complaint for
Fraud, Fraudulent Concealment, and Declaratory Relief, Case. No.
2:21-cv-08088-SB-SK, filed in the Central District of California by Defendant
Steven Marcus on October 12, 2021 (Exhibit A);
14. Order of
Dismissal and Order to Show Cause re: Rule 11 Sanctions entered in No.
2:21-cv-08088-SB-SK, Central District of California, dated March 11, 2022
(Exhibit B);
15. Order
Imposing Sanctions entered in No. 2:21-cv-08088-SB-SK, Central District of
California, dated May 3, 2022 (Exhibit C);
16. Order
Dismissing Appeal entered by the Ninth Circuit Court of Appeal on October 12,
2022 (No. 22-55553) (Exhibit D).
Plaintiffs’ request is granted. The existence and legal
significance of these documents are proper matters for judicial notice. (Evid.
Code § 452(d), (h).)
Meet and
Confer Efforts
As of January 1,
2018, a party filing a MJOP must meet and confer in person or by telephone with
the party who filed the pleading that is subject to the motion, identifying all
of the specific allegations that it believes are subject to be stricken and,
with legal support, the basis of the deficiencies. (CCP § 439(a)(1).) “The
parties shall meet and confer at least five days before the date a motion for
judgment on the pleadings is filed. If the parties are
unable to meet and confer by that time, the moving party shall be granted an
automatic 30-day extension of time within which to file a motion for judgment
on the pleadings, by filing and serving, on or before the date a motion
for judgment on the pleadings must be filed, 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.” (CCP §
439(a)(2).)
Plaintiffs submit
the declaration of their counsel, Brooke Myers Wallace (“Wallace”), to show
compliance with CCP § 439(a)(1). Wallace attests that on January 22, 2023,
counsel sent Defendant’s counsel “an email requesting a meet-and-confer to
discuss” the issues raised in this motion and “Defendant did not respond before
the motion was filed.” (Wallace Decl. ¶2.) The Wallace Declaration is clearly
insufficient as it makes clear that the parties have failed to meet and confer
around the issues raised in this motion. However, failure to meet and confer
does not constitute grounds for denying this motion; the court therefore
addresses the merits of the papers.
Discussion
I.
Legal Standard
A plaintiff may
move for judgment on the pleadings when the “answer does not state facts
sufficient to constitute a defense to the complaint.” (CCP § 438(b)(1) &
(c)(1)(A).) “A motion for judgment on the pleadings may be made at any time
either prior to the trial or at the trial itself. [Citation.]” (Ion
Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 877.) “A motion for
judgment on the pleadings performs the same function as a general demurrer, and
hence attacks only defects disclosed on the face of the pleadings or by matters
that can be judicially noticed. Presentation of extrinsic evidence is therefore
not proper on a motion for judgment on the pleadings.” (Cloud v. Northrop
Grumman Corp. (1998) 67 Cal.App.4th 995, 999 (Citations Omitted).) The
standard for ruling on a motion for judgment on the pleadings is essentially
the same as that applicable to a general demurrer, that is, under the state of
the pleadings, together with matters that may be judicially noticed, it appears
that a party is entitled to judgment as a matter of law. (Bezirdjian v. O'Reilly (2010) 183 Cal.App.4th 316, 321-322
(citing Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216).)
“Generally speaking, the determination whether an answer
states a defense is governed by the same principles which are applicable in
determining if a complaint states a cause of action.”¿¿(South Shore Land Co.
v. Petersen¿(1964) 226 Cal.App.2d 725, 732;¿In re Quantification
Settlement Agreement Cases¿(2011)¿201 Cal.App.4th 758, 813¿(Quantification)¿[“affirmative
defenses cannot be pled as mere legal conclusions, but must instead be alleged
with as much factual detail as the allegations of a complaint.”].)¿¿
Affirmative defenses are¿pled¿based upon facts
demonstrating that no cause of action exists, notwithstanding the truth of the
complaint’s allegations.¿¿(Walsh v. W. Valley Mission¿Cmty. College Dist.¿(1998)¿66
Cal.App.4th 1532, 1542 n.3.)¿ “The phrase ‘new matter’¿refers to¿something
relied on by a defendant which is not put in issue by the plaintiff.¿¿Thus,
where matters are not responsive to essential allegations of the complaint,
they must be raised¿in the answer as new matter.¿¿Where, however, the answer
sets forth facts showing some essential allegation of the complaint is not
true, such facts are¿not new matter,¿but only a traverse.”¿ (State Farm Mut.
Auto. Ins. Co. v. Superior Court¿(1991) 228 Cal.App.3d 721, 725¿(State
Farm).)¿
The¿same pleading of ultimate facts in support of such new
matter, rather than legal conclusions, is required as in pleading the
complaint.¿¿As
a general rule, the answer must allege facts constituting the affirmative
defense in the same manner as a complaint must do for a cause of action.¿¿(FPI
Development, Inc. v. Nakashima¿(1991) 231 Cal.App.3d 367, 384.)¿¿“Generally
it is an abuse of discretion to sustain a demurrer without leave to amend if
there is any reasonable possibility that the defect can be cured by
amendment.”¿ (Goodman v. Kennedy¿(1976) 18 Cal.3d 335, 349.)¿
II.
Analysis
For purposes of res judicata, a voluntary dismissal with
prejudice is the equivalent to a judgment on the merits in favor of the
defendant who was dismissed. (Long Beach Grand Prix Ass’n v. Hunt (1994)
25 Cal.App.4th 1195, 1197, 1203; accord Alpha Mechanical,
Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of
Amer. (2005) 133 Cal.App.4th 1319, 1330.) “A retraxit arising from a
dismissal with prejudice thus operates as a legal fiction, and it is given the
same finality as if the matter were adjudicated and proceeded to a final
judgment on the merits.” (Id., at p. 1331.) The dismissal of a complaint
with prejudice operates as a retraxit, giving the same finality as a final
judgment. (See Alpha Mechanical Heating & Air Conditioning, Inc. v.
Travelers Casualty & Surety Co. of America (2005) 133 Cal.App.4th 1319,
1330-32. (“Alpha Mechanical”))
Plaintiffs here contend Defendant Steven’s affirmative
defenses, including his “crossclaims” alleged as affirmative defenses, are
insufficiently pled and fail as a matter of law because they contend Steven has
abandoned his affirmative defenses and crossclaims. (Motion, 10-11.)
Specifically, Plaintiffs contend Defendant Steven’s failure to reallege his
claims in the FACC after the January 6, 2021 order sustaining Plaintiffs’
demurrer to the initial Cross-Complaint now mean the omitted claims were
abandoned by Steven and reached their final judgment on the merits. (Id.;
citing Delaney v. Super. Fast Freight (1993) 14 Cal.App.4th 590, 594; Blank
v. Kirwan (1985) 39 Cal.3d 311, 320.) Plaintiffs also point to Border
Bus. Park, Inc. v. City of San Diego (2006) 142 Cal.App.4th 1538, 1564 to
contend a plaintiff’s election not to amend their complaint “was sufficiently
final for purposes of issue preclusion.” (Motion, 11.) Therefore, Plaintiffs
contend Steven’s retraxit of these claims as cross-claims also work to prohibit
Steven from relitigating these claims as affirmative defenses. (Motion, 12-14.)
In support, Plaintiffs cite Alpha Mechanical to
correctly explain a relitigating of “the same subject matter” which was finally
resolved in a cross-complaint via retraxit is prohibited. (Id.; Alpha
Mechanical, supra, 133 Cal.App.4th at 1331-2; citing Torrey Pines Bank
v. Sup. Ct., (1989) 216 Cal.App.3d 814.) Lastly, Plaintiffs contend
Defendant Steven’s affirmative defenses do not incorporate by reference “the
allegations made in the rest of the document,” and therefore, the affirmative
defenses’ pleadings “must be based on the same facts alleged in support of the
dismissed, finally resolved, cross-claims.” (Motion, 14.) Plaintiffs further
specify the affirmative defenses “were recited by name only, and no acts were
alleged” in support of the affirmative defenses of Steven’s Answer. (Id.)
Plaintiffs therefore contend in order to avoid inconsistent rulings and judicial
waste, the court should apply retraxit to Steven’s claims. (Motion, 15; Walsh
v. West Valley Mission Community College Dist., (1981) 66 Cal.App.4th 1532,
1545-47.)
In opposition, Defendant Steven concedes “Plaintiffs request
that Defendant be limited in his ability to defend himself based on a decision
to not seek an amendment to crossclaims in the very same case ... two full
years after the ruling relied upon” and “only five weeks before trial.” (Opp.,
1.) Steven further explains the four Affirmative Defenses to include:
1. The Complaint fails to state a
claim upon which relief can be granted.
2. The purported agreement attached to the complaint is
not valid for reasons of (among others) extortion, duress, fraud, undue
influence, unconscionability, and failure of consideration.
3. The causes of action alleged, and each of them, are
each barred by the doctrine of fraud, estoppel, laches, and/or waiver.
4. The causes of action alleged, and each of them, are
barred by the statute of limitations.”
(Opp., 6.)
Steven further
explains that after the demurrer to his Cross-Complaint was sustained, “Steven
chose not to pursue his crossclaims further.” (Opp., 8.) However, Defendant
Steven argues “there was never any argument made, let alone any argument accepted,
that undermines any of Steven’s four affirmative defenses.” (Id.) Steven
contends none of the affirmative defenses are “impacted by the arguments
supporting Plaintiffs’ demurrer.”
Defendant
explains the first affirmative defense is “simply a statement that Plaintiffs
cannot meet their burden of proof;” the third affirmative defense involves
whether “Plaintiffs have engaged in inequitable behavior in connection with
attempting to fashion and enforce a contract or fraud claim;” and the fourth affirmative
defense only regards the applicable statute of limitations. (Opp., 9.)
Defendant contends none of these three affirmative defenses are addressed by
the sustaining of the demurrer to the cross-complaint. (Id.) With
regards to the second affirmative defense, Defendant contends “the fraud and
extortion affirmative claims were rejected ... on grounds that are completely
unnecessary to establishing the affirmative defenses.” (Opp., 10.) Here,
Defendant further argues that arguments “relating to duress, undue influence,
unconscionability, and failure of consideration” were ever addressed and
abandoned in prior rulings. (Id.)
Lastly, Defendant contends:
“the affirmative claims in the
crosscomplaint [sic] and the affirmative defenses in the Answer do not involve
the same facts and issues. To the contrary, the facts resolved by Judge Burdge
in January 2021 are not related to the facts necessary to establish the
affirmative defenses. Further, the doctrine of res judicata requires a final
judgment in a different case. This case is still ongoing, and there is no
judgment in a prior proceeding.”
(Opp., 12.)
However,
Defendant fails to address any arguments of retraxit or otherwise abandonment
of claims originally pled in the cross-complaint and FACC. Defendant further
fails to point to any supporting authority to suggest the preclusive prior
rulings of a court cannot be enforced in the same action.
Plaintiffs here
correctly explain that Defendant “voluntarily abandoned the non-tuition-related
cross-claims subject to the demurrer in the face of an adverse ruling, as well
as abandoning his declaratory judgment action of unenforceability of the
[Non-Disclosure Agreement].” (Reply, 3.) Therefore, Plaintiffs correctly
contend retraxit applies here. (Reply, 4-6.) Plaintiffs compare the
cross-claims Defendant alleged and then abandoned, with the allegations made in
Defendant’s Answer and affirmative defenses. (Id.) Plaintiffs make this
comparison to show the no “unique facts [are] alleged in support” of these
affirmative defenses, and therefore, they rely on the same set of factual
allegations and conclusions as the abandoned cross-claims. (Id.)
Plaintiffs
further contend Defendant “would have this Court disregard his motives for
abandoning his cross-claims... “to avoid a dismissal with prejudice, and to
forum-shop them in federal court.” (Reply, 6-7.)
Here, Plaintiffs
have made a sufficient showing that retraxit applies to the cross-claims
alleged in Defendant’s Answer, as binding precedent shows Defendant has clearly
abandoned those claims after they were sustained on demurrer. As Plaintiffs
correctly point out, the lack of “unique facts” pled to support the affirmative
defenses infers that the allegations of the cross-complaint are made to support
the affirmative defenses. As the relitigation of the cross-claims are now
prohibited through retraxit, the lack of factual allegations shows the affirmative
defenses to be insufficiently pled. The affirmative defenses plead only legal
contentions, devoid of any allegations of fact which can be taken as true by
this court at this stage. Instead, the affirmative defenses plead only
conclusory claims and fail to incorporate other factual allegations made in the
Answer. (FPI Development, Inc. v. Nakashima¿(1991)
231 Cal.App.3d 367, 384; Quantification.) Therefore, the court
finds the affirmative defenses to be defective on their face.
For these
reasons, Plaintiffs’ motion is granted.
Conclusion
Plaintiffs’
motion for judgment on the pleadings is granted. Defendant Steven is granted 30
days leave to amend only the Affirmative Defenses of the Answer. Plaintiffs are
to give notice.