Judge Salvatore Sirna, Case Number: 21PSCV01087, Date: 2023-10-16 Tentative Ruling

Plaintiff Ian Giant, Inc’s Motion for Summary Adjudication is GRANTED IN PART, DENIED IN PART.

The motion is GRANTED as to the issue of whether Shang was authorized to use CG Plastics’ funds for work on Shang’s personal residence and DENIED as to the remaining issues.

This is a breach of contract action arising from a recycling venture. In March 2019, Dongjin Zhang agreed to become business partners with Defendant Sam Shang in a recycling venture. On April 23, 2019, Shang formed CG Plastics LLC (CG Plastics) and assisted Zhang in forming Ian Giant, Inc. (Ian Giant) as Zhang’s investment company. On May 24, Zhang alleges Shang, without Zhang’s consent or approval, caused CG Plastics to enter into a lease agreement for a warehouse in Rancho Cucamonga. On June 28, Zhang alleges Shang told Zhang that the company needed an investment and that each of them needed to contribute $100,000. While Zhang subsequently wired $100,000 into CG Plastics’ bank account, Zhang alleges Shang never made a matching investment and only contributed $5,000.

Zhang then alleges Shang used CG Plastics’ funds to hire an entity that Shang had formed ten days earlier named Renova Environment LLC (Renova Environment) for consulting services. On September 6, 2019, Zhang and Shang memorialized their previous oral agreement into an operating agreement for CG Plastics. Zhang then made subsequent investments of $150,000 on September 11, 2019; $150,000 on October 17, 2019; and $100,000 on November 29, 2019. Zhang alleges Shang only invested a total of $92,000 into CG Plastics. Shang also had CG Plastics enter into an amended lease with an increased security deposit of $120,000 and paid Renova Environment an additional $150,000 in fees and costs.

On February 2, 2020, Shang requested Zhang loan CG Plastics $125,000 for business expenses. After Zhang declined Shang’s request, Shang claimed CG Plastics needed to urgently pay expenses to prevent losses and convinced Zhang to make a loan of $100,000 on the condition that it would be repaid by February 28. On March 4, Shang reported to Zhang that CG Plastics received an eviction notice for its warehouse and would need to hire legal counsel to reclaim $360,000 in rental losses. On March 6 and March 10, Zhang requested repayment of the loan and Shang agreed to repay the loan by April 15. After Shang failed to repay the loan on April 15, Zhang was unable to contact Shang and discovered CG Plastics’ bank account had less than $3,000.

On December 30, 2021, Zhang, individually and on behalf of Ian Giant, filed a verified complaint against Shang; NP 8720 Rochester, LLC; CG Plastics; Renova Environment; and Does 1-10, alleging the following causes of action: (1) breach of contract, (2) breach of implied-in-fact contract, (3) breach of written contract, (4) breach of fiduciary duty, (5) negligent misrepresentation, (6) fraud, (7) unjust enrichment, (8) conversion, (9) accounting, (10) constructive trust, (11) resulting trust, (12) fraudulent conveyance, and (13) declaratory relief.

On March 25, 2022, Zhang and Ian Giant filed a First Amended Verified Complaint (FAC) against the same defendants except NP 8720 Rochester, LLC and alleged the following causes of action: (1) breach of contract, (2) breach of implied-in-fact contract, (3) breach of written contract, (4) breach of fiduciary duty, (5) negligent misrepresentation, (6) fraud, (7) unjust enrichment, (8) conversion, (9) accounting, (10) resulting trust, (11) fraudulent conveyance, and (12) declaratory relief.

On January 18, 2023, Zhang and Ian Giant, derivatively on behalf of CG Plastics, filed a Second Amended Verified Complaint (SAC) against the same defendants and alleging the same causes of action.

On April 4, 2023, Ian Giant filed one of the present motions for summary adjudication. And on April 5, Zhang filed the other motion for summary adjudication. At a hearing on July 18 for the motions, the court continued the hearing and allowed Plaintiffs to file amended notices for their motions. While Zhang filed an amended notice on July 26, Ian Giant did not.

A hearing on the motions is set for October 16, 2023, along with a case management conference on November 6.

Ian Giant makes the following objections to Shang’s declaration and the court rules as follows: OVERRULED as to Nos. 1, 3, 5, 6, 7, 8, and 9 and SUSTAINED as to 2, 4, 10, and 11. Any other objections not made in compliance with California Rules of Court, Rule 3.1354 (b) is not considered by the court.

Zhang moves for summary adjudication of Zhang’s third cause of action for breach of written contract. Ian Giant moves for summary adjudication of eight issues involving whether Shang had the authority to bind CG Plastics into agreements with third parties, whether Shang breached fiduciary duties in entering into those agreements, and whether Shang was authorized to use CG Plastics’ funds for work on Shang’s personal residence.

For the following reasons, the court GRANTS Ian Giant’s motion for summary adjudication of whether Shang was authorized to use CG Plastics’ funds for work on Shang’s personal residence. The court DENIES Zhang’s motion for summary adjudication of the third cause of action for breach of written contract and Ian Giant’s motion for summary adjudication of the remaining issues.

A motion for summary judgment or adjudication provides “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.) It must be granted “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, quoting Code Civ. Proc., § 437c, subd. (c).) To establish a triable issue of material fact, the opposing party must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) 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.)

Zhang argues Zhang is entitled to summary adjudication on the third cause of action for breach of a written loan agreement. The court disagrees.

To state a cause of action for breach of contract, a plaintiff must be able to establish “(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.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

According to Zhang’s evidence, Shang signed an agreement where Zhang agreed to loan $80,000 to Shang on February 3, 2020. (SSSSUMF[1], ¶ 6.) In exchange, Shang agreed to repay the $80,000 by February 28. (SSSSUMF, ¶ 6.) Shang also agreed to pay an additional $20,000 to Zhang to reimburse an overpayment Zhang made to CG Plastics. (SSSSUMF, ¶ 6.) On February 4, Zhang wired $80,000 to Shang. (SSSSUMF, ¶ 7.) Subsequently, Shang failed to make any payments on the loan by February 28 or anytime thereafter. (SSSSUMF, ¶ 8-9.) Based on the foregoing, Zhang submitted evidence establishing the existence of a contract, the performance of a contract, Shang’s breach, and Zhang’s resulting damages. Accordingly, Zhang has met Zhang’s burden on summary adjudication and the burden now shifts to Shang to demonstrate a triable issue of material fact.

In response, Shang does not dispute that Shang signed the agreement and failed to repay the $100,0000. (SSSSUMF, ¶ 6, 8-9.) Instead, Shang argues Zhang is not entitled to summary adjudication as a matter of law because the loan agreement is unenforceable. Shang argues it is unenforceable because the loan agreement was unconscionable and entered under duress.

“Unconscionability is a flexible doctrine designed to allow courts to directly consider numerous factors which may adulterate the contractual process.” (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 484 (A & M Produce).) “[T]he core concern of the unconscionability doctrine is the ‘absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.’” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145, quoting Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659, 684-685.) “Unconscionability is ultimately a question of law for the court.” (Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 851.) It “requires oppression or surprise—that is, procedural unconscionability—along with the overly harsh or one-sided results that epitomize substantive unconscionability.” (De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966, 982.) “Some measure of both procedural and substantive unconscionability must be present—although given the sliding-scale nature of the doctrine, more of one kind mitigates how much of the other kind is needed.” (Id., at p. 982.)

Procedural unconscionability requires “oppression” or “surprise” in the negotiation of a contract. (A & M Produce, supra, 135 Cal.App.3d at p. 486.) “‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’” (Ibid, quoting Williams v. Walker-Thomas Furniture Co. (D.C. Cir. 1965) 350 F.2d 445, 449.) “‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in a prolix printed form drafted by the party seeking to enforce the disputed terms.” (Ibid.) “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party's review of the proposed contract was aided by an attorney.” (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348.)

In this case, Shang only had a few days to consider Zhang’s loan offer as Shang requested help from Zhang on an unspecified date in February 2020 and signed the agreement on February 3, 2020. (Shang 2nd Decl., ¶ 12-13.) It also appears significant pressure was placed on Shang to sign the agreement as Shang feared CG Plastics would be evicted and Shang would lose an investment of $91,880 if Shang could not obtain funds for CG Plastics’ rent. (Shang 2nd Decl., ¶ 13-14.) Shang stated, “I had no meaningful choice but to follow [Zhang’s] directive” and “[i]f I had more time, I would have negotiated terms that were not so grossly unfavorable to me.” (Shang 2nd Decl., ¶ 14-15.) Based on these factors, the court finds a degree of procedural unconscionability existed in the form of oppression.

But even if terms are procedurally unconscionable, the court will only refuse to enforce them if they are also substantively unconscionable. (A & M Produce, supra, 135 Cal.App.3d at p. 486-487.) Substantive unconscionability “concerns whether a contractual provision reallocates risks in an objectively unreasonable or unexpected manner” that shocks the conscience. (Jones v. Wells Fargo Bank (2003) 112 Cal.App.4th 1527, 1539-1540.) Terms that are merely unreasonable and do not “shock the conscience” fail to meet this standard. (American Software, Inc. v. Ali (1996) 46 Cal.App.4th 1386, 1391.) This is because “[a] party cannot avoid a contractual obligation merely by complaining that the deal, in retrospect, was unfair or a bad bargain.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 911.) To “shock the conscience,” the terms go beyond a simple bad bargain and be “overly harsh,” “unduly oppressive,” or “unreasonably favorable.” (Ibid.)

In addition, the contract must also lack justification for being overly harsh or one-sided. (A & M Produce, supra, 135 Cal.App.3d at p. 487.) For example, overly harsh or one-sided terms may be found unconscionable when they shift risk to the party without control over that risk “in contravention of the basic principle that the ‘risk of loss is most appropriately borne by the party best able to prevent its occurrence.’” (Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1324, quoting A & M Produce, supra, 135 Cal.App.3d at p. 491; see, e.g., Allan v. Snow Summit, Inc. (1996) 51 Cal.App.4th 1358, 1377 [waiver placing risk of injury on skier was appropriate where risk was based on skier’s individual acts and ability]; Kurashige v. Indian Dunes, Inc. (1988) 200 Cal.App.3d 606, 614-615 [waiver placing risk of injury on motorcyclist was appropriate where risk was based on motorcyclist’s individual acts and ability].)

In this case, Shang argues the agreement was substantively unconscionable because it required Shang to personally guarantee the repayment of a loan for CG Plastics. Shang also notes that it required Shang to cover a $20,000 overpayment that Zhang had made to CG Plastics, not Shang. In other words, Shang is arguing the agreement is unconscionable because it requires Shang to personally assume CG Plastics’ debt when CG Plastics is jointly owned by Shang and Ian Giant. (See SSSSUMF, ¶ 3.) Because the agreement essentially shifts all risk of default on Shang when the control over that risk is jointly exercised by Shang and Zhang, this is sufficient to create a triable issue on the question of whether the terms of this loan agreement were one sided, unjustified, and thus substantively unconscionable.

Thus, because the court finds the loan agreement is procedurally unconscionable and a triable issue exists regarding whether the loan agreement is substantively unconscionable, Shang has met the burden of establishing Zhang is not entitled to summary adjudication of this issue. Accordingly, Zhang’s motion for summary adjudication of the third cause of action for breach of written loan agreement is DENIED.

Ian Giant contends Shang was not authorized to bind CG Plastics to lease agreements for the Rancho Cucamonga warehouse, a contract with Renova Environment, a contract with Montrose Water and Sustainability Services, a loan agreement with Kray-Z Logistic, LLC, and employment agreements with Hongjuan Li and Sophia Liu. The court disagrees.

“Agency is either actual or ostensible. (Civ. Code, § 2298.) An actual agency exists when one person is employed to represent another (Civ. Code, § 2299), while an ostensible agency exists when the principal causes a third person to believe another, not employed by him, is his agent. (Civ. Code, § 2300.)” (Vallely Investments, L.P. v. BancAmerica Commercial Corp. (2001) 88 Cal.App.4th 816, 826.)

In this case, paragraph eighteen of CG Plastics’ operating agreement states as follows:

“Only the following individuals, classes or groups have authority to bind the Company in contract: Sam Shang may bind the Company in contract, except any employment contract, real estate contract, or contract with a consideration of $20,000 or more, in which case at least two Members shall be signed on behalf of Company.” (SSSUMF[2], ¶ 6; Maxwell Decl., Ex. 3, p. 4, ¶ 18.)

Paragraph sixty-six of the operating agreement requires unanimous consent from CG Plastics’ members to incur Company liabilities over $20,000, to incur a single transaction expense over $20,000, to endanger ownership or possession of Company property, or to release any Company claim without full payment. (SSSUMF, ¶ 6; Maxwell Decl., Ex. 3, p. 12-13, ¶ 66.)

Pursuant to this operating agreement, each of the contracts or agreements at issue would have required Shang to obtain approval from Ian Giant as the other member of CG Plastics. The first lease agreement for the Rancho Cucamonga warehouse was a real estate contract and involved more than $20,000 in consideration as it required a security deposit of $195,852 and monthly rent of at least $39,166.40. (SSSUMF, ¶ 9-10; Maxwell Decl., Ex. 5.) An amended lease agreement also involved more than $20,000 in consideration as it increased the security deposit to $120,000. (SSSUMF, ¶ 15-16; Maxwell Decl., Ex. 6.) Both agreements were only signed by Shang. (SSSUMF, ¶ 12; Maxwell Decl., Ex. 1, p. 218:3-5, Ex. 5, Ex. 6.)

The consulting agreement with Renova Environment involved more than $20,000 in consideration as it provided for a proposed budget of $427,100. (SSSUMF, ¶ 46; Maxwell Decl., Ex. 16.) The contract with Montrose Water and Sustainability Services (Montrose) also involved more than $20,000 in consideration as it provided for a proposed budget of $20,880. (SSSUMF, ¶ 53; Maxwell Decl., Ex. 17.) Both agreements were only signed by Shang. (SSSUMF, ¶ 47, 54; Maxwell Decl., Ex. 16-17.) CG Plastics also loaned $30,000 to an entity named Kray-Z Logistics, LLC (Kray-Z). (SSSUMF, ¶ 62-64; Maxwell Decl., Ex. 1, p. 146:8-147:12, 149:10-150:16.) Although the amount loaned involved more than $20,000 in consideration, Shang made the agreement for CG Plastics orally. (SSSUMF, ¶ 63-64; Maxwell Decl., Ex. 1, p. 151:13-18.)

Last, Ian Giant claims Shang hired Hong Juan Li and Sofia Liu for CG Plastics. (SSSUMF, ¶ 75, 79.) However, the evidence cited by Ian Giant does not establish this material fact. While Ian Giant cites to special interrogatories propounded on Shang, Shang merely provides the job responsibilities for these employees and does not state who hired them. (SSSUMF, ¶ 75, 79; Maxwell Decl., Ex. 18, p. 14:13-14, 19-22.) A citation to Shang’s deposition is similarly insufficient as Shang just provides a more detailed job description and does not state who hired either employee. (SSSUMF, ¶ 75; Maxwell Decl., Ex. 1, p. 132:21-134:9.)

Based on the above undisputed material facts, Ian Giant contends Shang lacked authority to bind CG Plastics to these agreements without Ian Giant’s signature pursuant to CG Plastics’ operating agreement. In response, Shang contends Shang’s actions were approved by Yu Chai who Shang believed to be an agent for Ian Giant.

“Ostensible authority is authority that the principal, either intentionally or by lack of ordinary care, causes or allows a third party to believe the agent possesses.” (Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994, 1005, citing Civ. Code, § 2317.) It “must be based on the acts or declarations of the principal and not solely upon the agent's conduct.” (Ibid.) “Whether an agent has ostensible authority is a question of fact and such authority may be implied from circumstances.” (Pierson v. Helmerich & Payne Internat. Drilling Co. (2016) 4 Cal.App.5th 608, 635.)

In this case, Shang states Chai often spoke for Ian Giant in group text messages and conference calls. (Shang Decl., ¶ 5-7.) In the same group text messages and conference calls, Shang states Zhang was also present and barely spoke. (Shang Decl., ¶ 5-7.) In fact, Plaintiffs’ own SAC alleges Shang communicated with Chai about Ian Giant’s investments. (SAC, ¶ 20-22.) With regards to each of the agreements discussed above, Shang contends Shang received approval from Ian Giant through Chai. Shang states Chai directed Shang to enter into the two lease agreements for the Rancho Cucamonga warehouse. (SSSUMF, ¶ 14, 20; Shang Decl., ¶ 11; Manjlai Decl., Ex. A, p. 221:17-222:5, 222:20-224:15.) Shang also states Chai agreed CG Plastics contracting with Renova Environment and Montrose. (SSSUMF, ¶ 45, 56-57; Shang Decl., ¶ 17-18; Manjlai Decl., Ex. A, p. 257:8-12.) With regards to the Kray-Z loan, Shang states Chai authorized the loan. (SSSUMF, ¶ 62; Shang Decl., ¶ 19.) Last, although Ian Giant provided insufficient evidence, Shang admits to hiring Li and Liu. (SSSUMF, ¶ 76, 80; Shang Decl., ¶ 20-21.) However, Shang states Shang hired Li at Zhang’s direction and Liu at Chai’s direction. (SSSUMF, ¶ 76, 80; Shang Decl., ¶ 20-21.)

While it is undisputed most of the documents at issue here were only signed by Shang, it is not undisputed that Shang lacked authority to act as CG Plastics’ agent given a question of fact remains as to whether Chai was Zhang’s agent. Accordingly, Ian Giant’s motion for summary adjudication is DENIED on the issue of Shang’s authority to bind CG Plastics.

Ian Giant maintains Shang’s decisions to enter into lease agreements for the Rancho Cucamonga warehouse and loan CG Plastics’ funds to Kray-Z breached Shang’s fiduciary duties to CG Plastics. The court disagrees.

The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.) “The manager of an LLC has a fiduciary duty and owes to the members of the LLC the same duties of loyalty and good faith as a partner owes to the partnership and its partners.” (Feresi v. The Livery, LLC (2014) 232 Cal.App.4th 419, 425.)

In this case, it is undisputed that Shang owed fiduciary duties to CG Plastics as its manager. To the extent Ian Giant maintains Shang breached those duties by entering into agreements without authorization, that ground for summary adjudication has already been rejected for the reasons detailed above. Ian Giant also maintains Shang’s actions breached Shang’s fiduciary duty of care. “A member’s duty of care to a limited liability company and the other members in the conduct and winding up of the activities of the limited liability company is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.” (Corp. Code, § 17704.09, subd. (c).) Whether Shang breached the fiduciary duty of care to CG Plastics is a question of fact. (Marzec v. California Public Employees Retirement System (2015) 236 Cal.App.4th 889, 915.)

With regards to the lease agreements for the Rancho Cucamonga warehouse, Ian Giant argues Shang breached Shang’s duty of care to CG Plastics for six reasons. First, Ian Giant argues Shang entered into the warehouse lease when CG Plastics did not have sufficient financial resources to pay the monthly rent. Around the time Shang signed the lease with a $195,832 security deposit and monthly rent of $39,166.40, CG Plastics only had $200 in its bank account. (SSSUMF, ¶ 25-26; Maxwell Decl., Ex. 5, Ex. 7, p. 120-121.) However, Shang believed it would take three months for CG Plastics to become operational after gaining licensing and equipment and that Chai promised to provide the equipment within the three months. (SSSUMF, ¶ 28; Shang Decl., ¶ 14; Manjlai Decl., Ex. A, p. 218:15-220:20.) Thus, based on these facts, a triable issue of material fact exists as to whether Shang’s decision to enter into a lease agreement was grossly negligent or reckless.

Second, Ian Giant contends Shang misunderstood the lease agreement by believing CG Plastics would not have to pay rent for the first three months and that the lease included an option for CG Plastics to purchase the warehouse. However, evidence provided by Ian Giant does not support this material fact. Instead, Shang believed CG Plastics would not have to pay the first three months of rent based on oral assurances by the warehouse’s landlord. (SSSUMF, ¶ 32; Maxwell Decl., p. 222:20-223:4, 224:16-225:23.) With regards to the option to purchase the warehouse, Shang’s belief was also based on the broker and the landlord’s assurances. (SSSUMF, ¶ 31; Maxwell Decl., p. 216:16-218:10.) Thus, while Shang’s failure to have these oral assurances memorialized in writing may have been negligent, a triable issue of material fact exists as to whether these failures rise to the level of gross negligence or recklessness.

Third, Ian Giant maintains Shang failed to determine whether the Rancho Cucamonga warehouse had sufficient electrical capacity before signing the lease. While Shang received building plans for the warehouse, Shang failed to review them because Shang did not understand how to read them. (SSSUMF, ¶ 34-35; Maxwell Decl., Ex. 1, p, 214:7-215:18, Ex. 12.) While Shang had an engineer inspect the warehouse to determine its electrical capacity three months after the lease was signed, Shang did not have an engineer inspect the warehouse before the signing of the lease because CG Plastics reportedly had insufficient funds to hire one. (SSSUMF, ¶ 35; Maxwell Decl., Ex. 1, p. 211:6-213:22.) However, Shang also stated the landlord or the broker assured Shang that the warehouse had sufficient electrical capacity for CG Plastics’ needs. (Maxwell Decl., Ex. 1, p. 210:1-9.) Thus, while Shang’s reliance on representations by the landlord or broker without additional verification may have been negligent, a triable issue of material fact exists as to whether this failure rises to the level of gross negligence or recklessness.

Fourth, Ian Giant argues Shang’s decision to enter into an amended lease agreement with an increased security deposit after learning the Rancho Cucamonga warehouse had insufficient electrical capacity was grossly negligent or reckless. (SSSUMF, ¶ 39; Maxwell Decl., Ex. 39.) However, as noted above, Shang stated CG Plastics entered into the amended lease at Chai’s direction because CG Plastics needed an additional reprieve from paying rent. (Manjlai Decl., Ex. A, p. 220:20-224:15.) Thus, a triable issue of material fact exists as to whether Shang’s decision to enter into an amended lease agreement was necessary or reckless and grossly negligent.

Fifth, Ian Giant contends Shang failed to pursue timely claims against CG Plastics’ landlord for allegedly misrepresenting the electrical capacity of the warehouse. While Shang retained counsel in March 2020 to fight CG Plastics’ eviction and raise the alleged misrepresentations as a defense, counsel terminated representation of CG Plastics after Shang allegedly failed to communicate. (SSSUMF, ¶ 41; Maxwell Decl., Ex. 1, p. 238:7-16, 239:17-23, Ex. 13, Ex. 14.) However, Shang provides two reasons why the case did not go forward. First, Shang testified in depositions that CG Plastics’ engineer was refusing to cooperate with Shang or CG Plastics’ counsel because the engineer did not want to be involved in any litigation. (Maxwell Decl., Ex. 1, p. 241:1-243:16.) Second, Shang stated CG Plastics was having difficulty paying for counsel’s services. (Maxwell Decl., Ex. 1, p. 244:8-19.) Shang’s stated difficulties with obtaining a witness and finances were also mentioned in correspondence from CG Plastics’ counsel. (Maxwell Decl., Ex. 13-14.) With regards to Shang’s failure to promptly pursue claims against CG Plastics’ landlord, Shang had first tried to get an additional reprieve from paying rent as noted above and had also investigated options for increasing the warehouse’s electrical capacity. (Maxwell Decl., Ex. 1, p. 238:17-239:17.) Ultimately, a triable issue of material fact exists as to whether Shang’s attempts at litigation were grossly negligent or reckless.

Sixth and last, Ian Giant maintains Shang’s failure to pay timely CG Plastics’ rent resulted in additional late fees. However, Shang states Shang was unable to timely pay CG Plastics’ rent because it had insufficient funds. (Shang Decl., ¶ 15.) Thus, a reasonable factfinder could find Shang was not responsible for paying CG Plastics’ rent given it allegedly lacked the funds.

Ian Giant also argues Shang’s decision to loan funds to Kray-Z and failure to memorialize the terms of the loan agreement were grossly negligent or reckless. However, Shang suggests it was necessary to sublease the warehouse to Kray-Z because of CG Plastics’ rent obligations. (SSSUMF, ¶ 67; Maxwell Decl., Ex 1, p. 234:14-25, 236:24-237:8.) A reasonable factfinder could find Shang’s decision to loan funds to Kray-Z was aimed at securing their sublease, since the loan was for Kray-Z to remodel the warehouse or obtain equipment. (Maxwell Decl., Ex. 1, p. 147:23-148:1.) To the extent it may have been negligent for Shang to fail to secure authorization for the sublease from the landlord and reduce the loan agreement to a signed writing or promissory note, a triable issue of material fact exists as to whether this failure rises to the level of gross negligence or recklessness. As for Shang’s failure to pursue legal remedies against Kray-Z, a reasonable factfinder could find this was reasonable given CG Plastics already had difficulty financing legal counsel for its own eviction.

Ultimately, because triable issues of material fact remain as to Shang’s alleged breaches of the fiduciary duty of care, Ian Giant’s motion for summary adjudication of these issues is DENIED.

Ian Giant contends Shang must reimburse CG Plastics for funds used on work for Shang’s personal residence. The court agrees.

In July and August of 2019, it is undisputed that Shang used CG Plastics’ funds to pay $19,000 to contractors for work performed on Shang’s personal residence. (SSSUMF, ¶ 83-84; Maxwell Decl., Ex. 1, p. 130:18-132:8; Ex. 7.) During a deposition, Shang admitted that the $19,000 was a personal expense and stated it was a mistake. (Maxwell Decl., Ex. 1., p. 130:18-132:8.) Shang also admitted that the funds needed to be repaid to CG Plastics. (Maxwell Decl., Ex. 1, p. 132:1-8.) And in Shang’s opposition to the present motions, Shang declines to oppose the grant of summary adjudication on this issue.

Accordingly, in light of the undisputed material facts and admissions by Shang, Ian Giant’s motion for summary adjudication of this issue is GRANTED.

Based on the foregoing, the court GRANTS Ian Giant’s motion for summary adjudication of whether Shang was authorized to use CG Plastics’ funds for work on Shang’s personal residence. However, the court DENIES Zhang’s motion for summary adjudication of the third cause of action for breach of written contract and Ian Giant’s motion for summary adjudication on the remaining issues.
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[1] Shang’s Second Separate Statement of Undisputed Material Facts

[2] Shang’s Separate Statement of Undisputed Material Facts