Judge: Robert S. Draper, Case: 22STCV28003, Date: 2023-05-01 Tentative Ruling
Case Number: 22STCV28003 Hearing Date: May 1, 2023 Dept: 78
Superior Court of California
County of Los Angeles
Department 78
HAWKEYE ENTERTAINMENT, LLC, et al.,
Plaintiffs,
vs.
MICHAEL CHANG, et al.;
Defendants.
Case No.: 22STCV28003
Hearing Date: May 1, 2023
[TENTATIVE] RULING RE:
DEFENDANTS MICHAEL CHANG, SMART CAPITAL INVESTMENTS I, LLC, SMART CAPITAL INVESTMENTS II, LLC, SMART CAPITAL INVESTMENTS III, LLC, SMART CAPITAL INVESTMENTS IV, LLC, SMART CAPITAL INVESTMENTS V, LLC, AND TOP PROPERTIES CORPORATION’S MOTION TO STRIKE.
Defendants’ Motion to Strike Punitive Damages from the Complaint is DENIED.
Answers must be filed and served within 30 days after the date of this order.
Moving party to provide notice and to file proof of service of such notice within five court days after the date of this order.
FACTUAL BACKGROUND
This is an action for breach of a commercial lease. The Complaint alleges as follows.
Plaintiff Hawkeye Entertainment, LLC (“Hawkeye”) entered into a lease agreement for commercial space (the “Subject Property”) with Defendants Smart Capital Investment I, LLC, Smart Capital II, LLC, Smart Capital Investment III, LLC, Smart Capital IV, LLC, and Smart Capital V, LLC’s (together, “Smart Capital”) predecessor-in-interest. (Compl. ¶¶ 9-14.) Hawkeye then sublet the Subject Property to Plaintiff W.E.R.M. (“WERM”, and with Hawkeye, “Plaintiffs”). (Compl. ¶ 20.) Smart Capital operates as Plaintiffs’ landlord under the lease. (Compl. ¶ 21.)
Prior to Smart Capital’s purchase of the Subject Property, Plaintiffs invested substantial resources into making the Subject Property code compliant. (Compl. ¶ 23.) Additionally, Plaintiffs obtained a conditional use permit for the on-site sale of alcoholic beverages (the “CUB Permit”) for the Subject Property. (Ibid.) With the CUB Permit obtained, WERM opened and began operating a successful night club (the “Night Club”) in the subject property. (Compl. ¶ 23.)
Plaintiffs are current with all obligations under the Lease. (Compl. ¶ 25.) This was confirmed in a recent Bankruptcy Court evidentiary hearing on a Motion to Assume Lease and Sublease (“Assumption Motion”) filed by Hawkeye and opposed by Smart Capital. (Ibid.)
Nonetheless, Smart Capital, through its manager, Defendant Michael Chang (“Chang”, and with Smart Capital, “Defendants”), have attempted to interfere with WERM’s operation of the Night Club. (Compl. ¶ 33.) Defendants have allegedly failed to cooperate with Plaintiffs’ effort to obtain a permit to serve alcoholic beverages on site (the “CUB”); manufactured erroneous defaults; contacted regulatory agencies without justification to interfere with Plaintiffs businesses; contacted the Los Angeles Police Department without justification to interfere with Plaintiffs’ business operations; contacted Plaintiffs’ business partners to interfere with contractual relations; failed to take reasonable steps to secure the Subject Property from criminal activity; trespassed onto the Subject Property without permission during business hours; interfered with Plaintiffs’ employees while they were trying to perform their duties; and, failed to maintain the building as required under the lease. (Compl. ¶ 35.)
PROCEDURAL HISTORY
On August 29, 2022, Plaintiffs filed the Complaint asserting seven causes of action:
1. Breach of Contract;
2. Breach of Implied Covenant of Good Faith and Fair Dealing;
3. Breach of Implied Covenant of Quiet Enjoyment;
4. Negligent Interference with Prospective Economic Advantage;
5. Intentional Interference with Prospective Economic Advantage;
6. Intentional Interference with Contractual Relations; and,
7. Specific Performance
On September 28, 2022, Defendants filed the instant Motion to Strike. The hearing on the instant motion was originally set for February 8, 2023.
On October 31, 2022, Defendants filed an Anti-SLAPP Motion.
On November 7, 2022, Plaintiffs filed a Motion for Preliminary Injunction.
On December 14, 2022, the Court granted Plaintiffs’ Motion for Preliminary Injunction.
On February 6, 2023, pursuant to Plaintiffs’ request, the hearing on the instant motion was continued until February 16, 2023.
On February 10, 2023, the Court continued the instant hearing until February 17, 2023.
On February 16, 2023, Plaintiffs filed an Opposition.
On February 16, 2023, Defendants filed a Reply requesting that the instant hearing be continued, as Plaintiff’s opposition was untimely and did not allow Defendants an opportunity to Reply. The Court granted that request, continued the instant hearing until March 23, 2023, and ordered Defendants to file a Reply five days before hearing.
On March 15, 2023, Defendants filed the Reply.
On March 23, 2023, the Court continued the instant hearing until May 1, 2023.
DISCUSSION
I. MOTION TO STRIKE
Defendants move to strike Plaintiffs’ Prayer for Punitive Damages from the Complaint.
California Civil Code section 3294 authorizes the recovery of punitive damages in non-contract cases where “the defendant has been guilty of oppression, fraud, or malice . . . .” (Civ. Code § 3294(a).) “‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Id. § 3294(c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id.,§ 3294(c)(2).) “‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Id., § 3294(c)(3).)
Punitive damages thus require more than the mere commission of a tort. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95.) Specific facts must be pleaded in support of punitive damages. (See Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-92.)
Here, Defendants contend that Plaintiffs fail to allege any facts that show Defendants acted with malice, oppression, or fraud. Defendants argue the Complaint does not allege with specificity any acts that exceed an allegation of a mere tort.
In Opposition, Plaintiffs contend, first, that the current stay of the preliminary injunction pending appeal stays this matter as well, as a stay suspends other matters “upon the judgment or order appealed from or upon the matters embraced therein or affected thereby. . .” (CCP § 916(a).) Plaintiffs argue that, as the Seventh Cause of Action for Specific Performance is based on Defendants’ failure to sign the CUB Application, which is the subject of the Preliminary Injunction, the instant Motion to Strike is stayed as well.
Plaintiffs are incorrect. Punitive Damages are not available for a specific performance cause of action. (See Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 693.) Accordingly, the outcome of Defendants’ appeal of the preliminary injunction has no bearing whatsoever on the outcome of the instant motion.
Next, Plaintiffs contend that the Complaint states facts demonstrating that Defendants acted with fraud, malice, or oppression. Plaintiffs note that the Complaint alleges that Defendants falsely informed their longtime clients that Fearless LA’s use of the Premises and arrangement with Plaintiff was a default of the Lease and in violation of the CUB.
Upon review of the Complaint, the Court finds that the Complaint states sufficient facts to support a prayer for punitive damages.
The Complaint alleges that Defendants “have been wrongfully engaging in a campaign to harass, bully and otherwise interfere with WERM’s quiet enjoyment of the Premises and ability to conduct business.” (Compl. ¶ 33.) Additionally, the Complaint alleges that “Defendants’ campaign to cause Plaintiffs’ harm are motivated, at least in part, by Chang and Smart Capital’s efforts to conceal misrepresentations made to lenders, punish Plaintiffs for the Assumption Order, and force Plaintiffs to satisfy Smart Capital and Chang’s requirements under city and/or county rules and regulations to prevent additional substantial business interruptions to Plaintiffs.” (Compl. ¶ 34.)
Finally, the Complaint alleges that Defendants’ agent repeatedly accessed the Subject Property with a firearm, and refused to surrender the firearm when Defendants asked him to do so in accordance with building policy. (Compl. ¶¶ 46-48.)
A reasonable trier of fact could find that these allegations, taken together, demonstrate oppressive, malicious or fraudulent conduct.
Accordingly, Defendants’ Motion to Strike the prayer for punitive damages from the Complaint is DENIED.
DATED: May 1, 2023
____________________________
Hon. Jill T. Feeney
Judge of the Superior Court
