Judge: Robert B. Broadbelt, Case: 19STCV33484, Date: 2023-12-14 Tentative Ruling

Tentative rulings are sometimes, but not always, posted. The purpose of posting a tentative ruling is to to help focus the argument. The posting of a tentative ruling is not an invitation for the filing of additional papers shortly before the hearing.

Case Number: 19STCV33484    Hearing Date: December 14, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:              Defendants Timothy R. Roth d/b/a The Roth Group, HB Construction, and Roth Management Group

RESPONDING PARTY:        Plaintiff John Q. Rodgers

(1)   Motion for Summary Judgment

(2)   Motion for Summary Judgment

(3)   Motion for Summary Judgment

The court considered the moving papers filed in connection with each motion.  The court considered only the opposition papers filed on November 30, 2023.  The court orders that the opposition papers filed and served on December 1, 2023, December 4, 2023, and December 5, 2023 are stricken because they were not filed and served at least 14 days before the date of the hearing on these motions, plus two days for electronic service.  (Code Civ. Proc., §§ 437c, subd. (a)(2), 1010.6, subd. (a)(3)(B), 436.)  The court has not considered the reply papers filed on December 11, 2023, and orders that the reply papers filed on that date are stricken because they were not filed and served at least five days before the date of the hearing on these motions, plus two days for electronic service.  (Code Civ. Proc., § 437c, subd. (a)(4), 1010.6, subd. (a)(3)(B), 436.)

EVIDENTIARY OBJECTIONS 

The court does not rule on defendants Timothy R. Roth, d/b/a The Roth Group, HB Construction, and Roth Management Group, Inc.’s evidentiary objections, filed on December 8, 2023, because the objections are directed to evidence that is not material to the court’s disposition of these motions.

REQUEST FOR JUDICIAL NOTICE

            The court grants defendants Timothy R. Roth, d/b/a The Roth Group, HB Construction, and Roth Management Group, Inc.’s requests for judicial notice.  (Evid. Code, § 452, subd. (d).)

LEGAL STANDARD

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.”  (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.)  A defendant or cross-defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “If the plaintiff cannot do so, summary judgment should be granted.”  (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)  “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”  (Id. at p. 467; Code Civ. Proc., § 437c, subd. (c).)

DISCUSSION

Defendants Timothy Roth, d/b/a The Roth Group (“Roth”), HB Construction (“HB”), and Roth Management Group (“Roth Management”) (collectively, “Defendants”) filed the three pending motions for summary judgment as to the Complaint filed by plaintiff John Q. Rodgers (“Plaintiff”).  Each of the three notices of motions and supporting memoranda state that the moving parties are all Defendants.  (Notices, pp. 1:26-2:6 [“Defendants Timothy R. Roth dba The Roth Group, HB Construction, and Roth Management Group” move for an order granting summary judgment on Plaintiff’s Complaint]; Mot., p. 1:24-26.)  The motions are substantially identical and do not distinguish as to which defendant has brought each motion.  Thus, the court       (1) interprets each motion for summary judgment to have been brought on behalf of each of the Defendants, and (2) discusses the three motions for summary judgment together in the interests of judicial economy and efficiency.

Defendants move for summary judgment on the following four grounds: (1) Defendants did not commit the wrongful acts and omissions described in the Complaint; (2) the statements of fraud are protected by the litigation privilege; (3) Plaintiff cannot prove the element of damages; and (4) issue preclusion and/or claim preclusion bar Plaintiff’s claims.  (Mot., pp. 10:28-11:13, 18:10-11, 18:19, 18:20, 20:2-3.)  

For the reasons set forth below, the court finds that Defendants have not met their burden to show that there is no triable issue as to any material fact and that Defendants are entitled to judgment as a matter of law on Plaintiff’s Complaint and therefore denies Defendants’ motions for summary judgment.  (Code Civ. Proc., § 437c, subd. (c).)

1.     The Element of False Misrepresentations of Fact

Plaintiff alleges six causes of action for (1) fraud and deceit; (2) fraud and deceit;             (3) fraud and deceit; (4) rescission and reformation of agreement; [1] (5) violation of Business and Professions Code section 17200; and (6) violation of Civil Code section 1770. 

In support of these causes of action, Plaintiff has alleged the following.  In July 2011, Plaintiff and Defendants entered into an oral contract, pursuant to which Defendants would perform work to repair and renovate the subject office building.  (Compl., ¶ 11.)  From 2012 to 2014, Roth presented various, fraudulent invoices to Plaintiff for payment, which Plaintiff paid.  (Compl., ¶¶ 11-12.)  Further, by the end of 2013, Roth represented to Plaintiff that he spent an additional $500,000 making repairs to the office building and presented Plaintiff with fraudulent documents to substantiate that amount.  (Compl., ¶ 14.) 

In October 2013, Roth informed Plaintiff that, in order to obtain financing to purchase the office building, the building would need to be placed in a formal business entity.  (Compl., ¶ 16.)  Pursuant to Roth’s representations, Plaintiff agreed to form a limited liability company with Roth (2601 PCH LLC (“PCH”)).  (Ibid.)  Thereafter, in September 2014, Plaintiff and Roth retained an accounting firm to determine their respective interests in PCH.  (Compl., ¶ 20.)  Roth gave the accounting firms fraudulent documents to support his claim that he had spent approximately $950,000 on the office building.  (Ibid.)  Based thereon, the accounting firm determined that Roth had made $950,000 in contributions, which Roth used to claim at least an equal interest in the building.  (Compl., ¶ 22.)

In addition to the actions described above, Plaintiff further alleges that Roth also presented false invoices to Plaintiff for his employees that performed work on the office building.  (Compl., ¶ 24.)  Specifically, Roth would (1) present fraudulent invoices to Plaintiff, (2) receive a check from Plaintiff, which was made out to the employee, (3) tell the employee that Plaintiff had addressed the check to the employee by mistake, (4) order the employee to deposit Plaintiff’s check into the employee’s bank account, and thereafter (5) order the employee to write a separate check to Defendants for the exact same amount as Plaintiff’s original check, such that it appeared that Plaintiff was writing checks to vendors and tradesmen who worked on the office building but instead, Defendants were the recipients of the funds.  (Compl., ¶ 24.)  Similarly, Roth formed “phony companies” and manufactured fraudulent invoices to represent that those companies performed work on the building.  (Compl., ¶ 23.)  Plaintiff would thereafter make payments to those companies.  (Compl., ¶ 23.)  Defendants also charged labor and material expenses incurred on Defendants’ other development projects to the office building project.  (Compl., ¶ 25.)

The court finds that Plaintiff’s causes of action are all based on the allegations set forth above.  Specifically, the first cause of action for fraud and deceit is based on the allegation that Defendants made false, fraudulent, and misleading representations to Plaintiff regarding the cost and extent of repairs made to the office building, including by using falsified invoices and documents.  (Compl., ¶ 29.)  The second cause of action for fraud and deceit is based on the allegation that Defendants made false, fraudulent, and misleading representations to Plaintiff regarding the cost and extent of repairs, as set forth above, and by inducing Plaintiff to form PCH and to sign other related contracts.  (Compl., ¶ 35.)  The third cause of action for fraud and deceit alleges that Defendants made false, fraudulent, and misleading representations to Plaintiff regarding the cost and extent of repairs, including by presenting to Plaintiff false and fraudulent documents stating that the office building had been fully and properly repaired, that a new roof had been installed, and that the building had been properly waterproofed.  (Compl., ¶ 44.)

The fourth cause of action for rescission and reformation seeks to rescind the operating agreement relating to the formation of PCH and all other documents involving the office building, based on the allegations that Defendants (1) made false, fraudulent, and misleading representations to Plaintiff regarding the cost and extent of repairs, and (2) induced Plaintiff to enter into a business relationship with them in order to purchase the office building.  (Compl., ¶¶ 50, 52, 54.)  The fifth cause of action for unfair competition under the Business and Professions Code alleges that Defendants engaged in unlawful, unfair, and fraudulent business practices based on the conduct described above.  (Compl., ¶ 57.)  Finally, the sixth cause of action for violation of Civil Code section 1770 alleges that Defendants violated that statute by making false statements about their work and the costs associated with the office building, including by presenting false and forged documents to Plaintiff.  (Compl., ¶ 61.)

Thus, Defendants argue that, because they did not engage in the wrongful acts and omissions set forth above, which support all of Plaintiff’s causes of action, they are entitled to summary judgment.  The court interprets this argument to challenge the following elements of Plaintiff’s causes of action: (1) misrepresentations (false representations, concealment, or nondisclosures), as to the first through third causes of action for fraud and deceit and the fourth cause of action for rescission based on fraud; (2) the underlying unlawful, unfair, or fraudulent business act or practices, as to the fifth cause of action for unfair competition; and (3) proscribed misrepresentations as set forth in the Consumers Legal Remedies Act, as to the sixth cause of action for violation of Civil Code section 1770.  (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294 [elements of cause of action for fraud]; Civ. Code, § 1689 [a party to a contract may rescind the contract if consent to the contract was obtained through fraud]; Adhav v. Midway Rent a Car, Inc. (2019) 37 Cal.App.5th 954, 970 [elements of unfair competition law claim]; Civ. Code, § 1770; In re Vioxx Class Cases (2009) 180 Cal.App.4th 116, 128 [“The CLRA declares numerous practices in the sale of goods or services to consumers to be unlawful” as set forth in Civil Code section 1770].)

The court finds that Defendants have not met their burden of showing that the Complaint for has no merit because Defendants have not shown that the elements of (1) misrepresentations, (2) unlawful, unfair, or fraudulent business acts or practices, and (3) proscribed misrepresentations under the Consumers Legal Remedies Act cannot be established.

The court acknowledges that Defendants have submitted the declaration of Roth, in which he states that (1) Roth did not send any invoices to Plaintiff, on behalf of himself, HB, or Roth Management, for work performed on the property because Roth “was not doing that work now [sic] were any businesses or entities in which [he] was involved[;]” (2) Roth “did not create any false invoices with regard to [PCH] and [he] did not alter any checks[;]” (3) Roth “did not commit any fraud on [Plaintiff] in [his] own name or in the name of the Roth Group and the claims against [Roth] and the Roth Group in the Exhibit 13 Complaint of [Plaintiff] are not true[;]” (4) HB “never entered into any kind of conspiracy with, engaged in any effort with, or acted in concert with or under anyone’s direction, to commit fraud, or any other wrongful acts, against [Plaintiff] and it did not engage in fraud, or any other wrongful acts, against [Plaintiff];” and HB “did not do any of the things that [Plaintiff] claims it did” in his Complaint; and (5) Roth Management “had no involvement with [PCH] or the Property” and committed no fraud on” Plaintiff, including by entering into a conspiracy with Defendants.  (Roth Decl., ¶¶ 23, 51, 52.) The court, however, finds Roth’s declaration to be insufficient for the following reasons.

First, the general statements that (1) Defendants did not commit the fraudulent acts described in the Complaint, and (2) the claims alleged in Plaintiff’s Complaint are untrue are conclusory, lack detail, and are therefore insufficient to show that Defendants did not commit the wrongful acts or omissions that constitute the bases for the Complaint.  (Roth Decl., ¶¶ 51-52.)

Second, although Roth’s statements that he did not issue false invoices and did not alter any checks are sufficient to show that Roth did not commit those wrongful acts, Defendants did not expressly address or negate the factual claim that Defendants charged labor and material expenses incurred in connection with their other development projects to the office building project.  (Compl., ¶ 25.)  Instead, Roth’s declaration shows only that (1) he did not send “any invoices for work performed on the Property[;]” (2) he did not create “false invoices with regard to PCH[;]” and (3) he “did not alter any checks[.]”  (Roth Decl., ¶ 23.)  This evidence negates the factual claims that Defendants presented forged or falsified invoices to Plaintiff for payment in connection with the office building project.  (Compl., ¶¶ 11, 22.)  It does not, however, show that Defendants did not improperly and wrongfully charge labor and material expenses incurred in connection with their own development projects.

Thus, because Defendants did not meet their burden of submitting evidence sufficient to show that Plaintiff cannot prove all of the factual claims underlying each cause of action in the Complaint, the court finds that Defendants have not met their burden to show that Plaintiff’s Complaint has no merit on the ground that Defendants did not commit the wrongful acts or omissions alleged therein.

2.     Litigation Privilege

“A privileged publication or broadcast is one made: [¶] (b) In any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or   (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure, except” as to certain statutorily-defined exceptions.  (Civ. Code, § 47, subd. (b).)  “The Supreme Court has established a four-part test for the application of the litigation privilege: it ‘applies to any communication (1) made in the judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.’”  (Foothill Federal Credit Union v. Superior Court (2007) 155 Cal.App.4th 632, 635.)

The court finds that Defendants have not met their burden of showing that the Complaint has no merit because Defendants have not shown that the defense of the litigation privilege bars all of Plaintiff’s causes of action.

In their motions, Defendants assert that the “statements of fraud” alleged in the Complaint “were made in mediation” and are therefore subject to the litigation privilege.  (Mot., p. 18:11-12.)  It appears that Defendants are referring to Plaintiff’s allegation that, during mediation of the dispute between Plaintiff and Roth regarding their respective interests in the office building, Roth used fraudulent documents to support his claim that he contributed $950,000 to the office building.  (Compl., ¶ 22.)  However, as set forth above, Plaintiff’s causes of action against Defendants are based on various other alleged statements and actions.  For example, Plaintiff also alleges that Roth falsely represented to Plaintiff that they would have to form PCH to purchase the building.  (Compl., ¶ 16.)  Plaintiff further alleges that Defendants fraudulently charged expenses relating to their other development projects to Plaintiff.  (Compl., ¶ 25.)  Defendants did not present evidence or argument establishing that those claims are protected by the litigation privilege.  Defendants did not, for example, present evidence showing that Roth’s representation that Plaintiff would have to create a business entity to purchase the office building was made during mediation.  Moreover, the allegation relating to Defendants’ fraudulent charging of expenses was not based on a statement, but rather Defendants’ alleged conduct.

Thus, because Defendants did not show that the factual bases underlying each cause of action alleged in the Complaint are barred by the litigation privilege, the court finds that Defendants have not shown that the Complaint lacks merit on the ground that the affirmative defense of the litigation privilege applies.

3.     Element of Damages

The court finds that Defendants have not met their burden of showing that the Complaint has no merit because Defendants have not shown that the element of damages cannot be established as to every cause of action alleged in the Complaint.

First, as to defendants HB and Roth Management, their motions do not address how their argument regarding damages applies to the fourth cause of action for rescission and reformation.  “Rescission and damages are alternative remedies.  [Citation.]  A party may seek rescission or damages for breach of contract or fraud ‘in the event rescission cannot be obtained’ in the same action.  [Citations].  But ‘[t]he election of one remedy bars recovery under the other.’”  (Wong v. Stoler (2015) 237 Cal.App.4th 1375, 1384.)  Here, in connection with the fourth cause of action, Plaintiff has alleged that “all contracts between Plaintiff[] and Defendants, including the attached Operating Agreement, as well as all documents involving the Office Building are null and void as a consequence of Defendants[’] actions and fraud.  As such, Plaintiff[] request[s] this Court to rescind the Operating Agreement and or reform it according to proof and all governing laws.”  (Compl., ¶ 54.)  Thus, because Plaintiff has requested only the “alternative remed[y]” of rescission in connection with this cause of action, the argument that Plaintiff cannot establish the element of damages is inapplicable and insufficient to show that Plaintiff cannot establish an element of the fourth cause of action.  (Ibid.; Wong, supra, 237 Cal.App.4th at p. 1384.)

The court therefore finds that defendants HB and Roth Management have not met their burden to show that each cause of action alleged in Plaintiff’s Complaint has no merit on the ground that Plaintiff cannot establish the element of damages.

Second, the court finds that Roth has not met his burden of submitting evidence to show that Plaintiff cannot establish the element of damages as to each legal theory underlying the first through third, fifth, and sixth causes of action.  (Hinesley, supra, 135 Cal.App.4th at p. 294 [damages is an element of fraud]; Bus. & Prof. Code, § 17204 [“a person who has suffered injury in fact and has lost money or property as a result of the unfair competition” may bring an action pursuant to Business and Professions Code section 17200]; In re Vioxx Class Cases, supra, 180 Cal.App.4th at p. 128-129 [any consumer who suffers damage as a result of the use of a practice declared unlawful by Civil Code section 1770 may bring an action to recover actual damages].)

As set forth above, Plaintiff’s claims for damages are based on the following allegations: (1) Plaintiff “paid Roth’s companies and vendors hundreds of thousands of dollars” based on Roth’s representations and false invoices; (2) Plaintiff made payments to “phony companies” formed by Roth to further defraud Plaintiff; (3) Plaintiff made payments to Roth’s employees, who were directed by Roth (i) to deposit the check issued by Plaintiff into the employee’s account, and (ii) to thereafter write a check to Defendants for the same amount; (4) Defendants charged labor and expenses incurred on Defendants’ other development projects; and (5) Plaintiff lost rent and income as a result of Defendants’ failure to properly repair the office building.  (Compl., ¶¶ 12-13, 17, 23-25, 27, 32, 38, 41, 44, 58, 61.)

Defendants rely on Roth’s declaration in support of their argument that Plaintiff cannot establish the element of damages.  (Mots., pp. 18:21-19:2, 19:7-11 [citing to material fact numbers 41-44]; Def. Material Fact Nos. 41-44 [citing Roth Decl., ¶¶ 27-28].)  In his declaration, Roth states the following: (1) Plaintiff never paid Roth any money, or allowed PCH to reimburse to him any advances, with regard to the subject property or PCH; (2) Plaintiff never paid HB “any money with regard to PCH, LLC or the Property[;]” and (3) Plaintiff never paid Roth Management “any money with regard to PCH, LLC or the Property.”  (Roth Decl., ¶¶ 27-28.)  

However, the portions of Roth’s declaration cited in support of their argument that Plaintiff cannot establish the element of damages do not show that Plaintiff did not pay for labor and material expenses incurred on Defendants’ other development projects.  (Compl., ¶ 25.)  The court acknowledges, as set forth above, that Defendants have presented evidence showing that Plaintiff did not pay any money to Defendants directly.  But the court has interpreted Plaintiff to allege that he incurred damages by paying Defendants directly (Compl., ¶¶  12-13, 17), by paying others who were either controlled by Defendants (Compl., ¶ 23) or directed by Defendants to transmit the money to Defendants (Compl., ¶ 24), and as a result of Defendants’ allegedly negligent repair of the building, which led to lost rents and incomes (Compl., ¶ 27).  Thus, while Roth’s declaration is sufficient to negate the factual grounds for some of the claims for damages (i.e., that Plaintiff paid Defendants directly pursuant to the allegedly false and fraudulent invoices), it is not sufficient to show that Defendants did not receive money from Plaintiff by directing others (i.e., Roth’s employees) to deposit the money paid by Plaintiff to Defendants’ accounts.  (Compl., ¶ 24.)

The court therefore finds that defendant Roth has not met his burden to show that each cause of action alleged in Plaintiff’s Complaint has no merit on the ground that Plaintiff cannot establish the element of damages.

4.     Claim Preclusion or Issue Preclusion

“Claim preclusion ‘prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.  [Citation.]  Claim preclusion arises if a second suit involves: (1) the same causes of action (2) between the same parties (3) after a final judgment on the merits in the first suit.  [Citations.]  If claim preclusion is established, it operates to bar relitigation of the claim altogether.  [¶]  Issue preclusion prohibits the relitigation of issues argued and decided in a previous case, even if the second suit raises different causes of action.  [Citation.]  Under issue preclusion, the prior judgment conclusively resolves an issue actually litigated and determined in the first action.”  (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 [internal citations omitted] [emphasis in original].)

The court finds that Defendants have not met their burden of showing that the Complaint has no merit because Defendants have not shown that claim preclusion or issue preclusion bars relitigation of all of the claims or issues alleged in the Complaint.  Although Defendants assert, in their motions, that Plaintiff “is also bound to the prior adjudication by principles of res judicata and collateral estoppe[l][,]” Defendants have not presented argument setting forth, expressly, which causes of action or issues were litigated and are precluded from being relitigated in this action.  (Mot., p. 20:2-3.) 

Thus, the court finds that Defendants did not meet their burden to establish that claim preclusion or issue preclusion bars every cause of action alleged against Defendants in the Complaint.

ORDER

The court denies defendants Timothy R. Roth, d/b/a The Roth Group, HB Construction, and Roth Management Group, Inc.’s motions for summary judgment.

The court orders plaintiff John Q. Rodgers to give notice of this ruling.

IT IS SO ORDERED.

DATED:  December 14, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court