Judge: Serena R. Murillo, Case: 21STCV41091, Date: 2023-05-19 Tentative Ruling
Case Number: 21STCV41091 Hearing Date: May 19, 2023 Dept: 31
TENTATIVE RULING
Defendants’ demurrer to Plaintiff’s second cause of action for Successor Liability is OVERRULED.
BACKGROUND
On November 08, 2021, IHeartMedia + Entertainment Inc. (“Plaintiff”) filed a Complaint against Special Entertainment Events, Inc. (“SEE”).
The operative Third Amended Complaint (“TAC”) adds Defendants SEE Attractions, Inc., (“SAI”) and SEE Global Events, Inc. (“SGEI”) and Does 1 to 10 and asserts causes of action for:
1. Breach of Accord Agreement (against Defendant SEE and Does 1 to 10);
2. Successor Liability (against Defendants SAI, SGEI, and Does 1 to 10);
3. Statutory Liability for Violation of Bulk Sale Statutes (against Defendants SAI,
SGEI, and Does 1 to 10);
4. Intentional Voidable Transfer (against all Defendants);
5. Constructive Voidable Transfer (against all Defendants); and
6. Constructive Voidable Transfer (against all Defendants).
On December 2, 2022, Defendants SEE, SAI, and SGEI (collectively “Defendants”) filed a Demurrer without Motion to Strike Plaintiff’s TAC, with respect to the second cause of action for Successor Liability.
On May 8, 2023, Plaintiff filed an opposition. On May 11, 2023, Defendants filed a reply.
LEGAL STANDARD
A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) To test the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded.¿ (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.”¿ (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)¿¿¿
DISCUSSION
a. Meet and Confer
Before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred, in person or telephonically, to determine whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc. (CCP) § 430.41.)¿
Defense counsel, Anne Singer, asserts that on November 18, 2022, she sent Plaintiff’s counsel an email pointing out the deficiencies in the TAC, but no resolution was reached. (Singer Decl.; Ex. “A” and “B.”) Thus, the meet and confer requirement is met.
b. Second Cause of Action: Successor Liability
Plaintiff asserts that on September 09, 2020, Plaintiff entered into a written Payment Agreement (the “Agreement”) with Defendant SEE to pay the balance due of $30,481.00 in installments. (TAC ¶ 9; Ex. “A.”) Plaintiff alleged Defendants breach the Agreement by failing to pay on November 1, 2020. (TAC ¶ 10.)
Under the second cause of action for Successor Liability, Plaintiff asserts that Defendants SAI and SGEI are both the successor/fraudulent transferee Defendants. Accordingly, Plaintiff asserts that Defendants SAI and SGEI are liable as successors of Defendant SEE for its debt. (TAC ¶¶ 12 -17.)
Defendants demur to Plaintiff’s TAC as to the second cause of action for Successor Liability on the basis that it fails to state sufficient facts or is unintelligible. (Code Civ. Proc., §§ 430.10 subds. (e) and (f).)
In California, the general rule is that a company that acquires the assets of a seller is not
responsible for the seller’s liabilities. (Ray v. Alad Corp. (1977) 19 Cal. 3d 22, 28.) However, Ray outlined four exceptions to the general rule:
“As typically formulated the rule states that the purchaser [of corporate assets] does
not assume the seller’s liabilities unless (1) there is an express or implied agreement
of assumption, (2) the transaction amounts to a consolidation or merger of the two
corporations, (3) the purchasing corporation is a mere continuation of the seller, or
(4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping
liability for the seller’s debts.”
(Id.)
Defendants argue that Plaintiff fails to allege specific facts of an acquisition. Notably, Plaintiff’s TAC does not address the deficiencies described in the Minute Order of September 30, 2022 regarding liability under the third Ray exception.[1] According to Defendants, “[a]lthough the TAC contains new allegations concerning Statements of Information regarding Defendants (¶15), those allegations do not constitute allegations that SAI and SGEI are mere continuation entities or why inadequate consideration was provided for the purchase of SEE.” (Motion, pp. 5-6.)
In opposition, Plaintiff argues that in paragraph 15 of the TAC, Plaintiff has alleged that Mr. Biallas holds every office of each of the named Defendants entities, along with the basis for such belief alleged. (Opposition, p. 3.)
In reply, Defendants argue again that Plaintiff has failed to address the deficiencies described in the Minute Order of September 30, 2022. Specifically, “Plaintiff’s claim that ‘Biallas holds every office of each of the named Defendant entities’ does not meet the Court’s requirement that Plaintiff show ‘a basis for its allegation’ that SAI and SGEI are…continuation entities of SEE….” (Reply, p. 2.) Therefore, “Plaintiff’s amended complaint is still deficient…as no basis for such belief is included anywhere in the complaint or the demurrer.” (Id.)
Here, the Court finds that Plaintiff’s TAC pleads facts to support its belief that SAI and SGEI are mere continuation entities of SEE. Paragraph 15 of the TAC provides:
Plaintiff is further informed and believes and, based thereon, alleges and that one or more persons were officers, directors or stockholders of both SEE and SAI and/or SGEI. Plaintiff has reviewed the most recent Statement of Information filed by SEE, SAI and SGEI with the California Secretary of State (which are published to the California Secretary of State web site; true and correct copies of which are collectively attached hereto as Exhibit “B” and, by this reference, incorporated herein as though set forth in full) and, based thereon, alleges that Mr. Martin Biallas is the Chief Executive Officer, Chief Financial Officer, Secretary and Director of SEE, SAI and SGEI.
(TAC ¶ 15.) As alleged in paragraph 15, Plaintiff asserts Successor Liability on the basis that “Mr. Martin Biallas is the Chief Executive Officer, Chief Financial Officer, Secretary and Director of SEE, SAI, and SGEIR.” Further, the basis for such belief alleged is that “Plaintiff has reviewed the most recent Statement of Information filed by SEE, SAI, and SGEI with the California Secretary of State (which are published to the California Secretary of State web site….” The TAC addresses the deficiencies described in the Minute Order of September 30, 2022 because it alleges Mr. Biallas holds every office of each of the named Defendant entities and the basis for such belief and, therefore, Defendants’ argument that the TAC is still deficient fails.
Accordingly, Defendants’ demurrer to Plaintiff’s second cause of action for Successor Liability is OVERRULED.
CONCLUSION
Defendants’ demurrer to Plaintiff’s second cause of action for Successor Liability is OVERRULED.
Moving party to give notice.