Judge: Stephen I. Goorvitch, Case: 22STCV11809, Date: 2023-08-14 Tentative Ruling
Case Number: 22STCV11809 Hearing Date: September 25, 2023 Dept: 39
John Bamberger v.
Linda Judd, et al.
Case No.
22STCV11809
Order Denying
Leave to Amend
BACKGROUND
Plaintiff
John Bamberger, as assignee of the Bamberger Family Trust (“Plaintiff”) filed
this action against Linda Judd, also known as Linda Judd-King (“Defendant”)
asserting causes of action for fraud, breach of fiduciary duty, elder abuse,
declaratory relief, and accounting. Defendant
demurs to the first amended complaint and moves to strike the prayer for
punitive damages and related allegations.
The Court sustained Defendant’s demurrer because this action is untimely. The Court issued an order to show cause why
leave to amend should be granted and ordered Plaintiff’s counsel to file a
response containing all facts that would be included in an amended
complaint. Having reviewed Plaintiff’s response,
the Court now denies leave to amend and dismisses this case with prejudice.
PLAINTIFF’S ALLEGATIONS
Plaintiff’s parents, Henry
Bamberger and Margot Bamberger, were co-settlors and co-trustees of the
Bamberger Family Trust, dated November 4, 1993.
(First Amended Complaint, ¶ 4.) Henry
Bamberger died on September 12, 2012.
(Id., ¶ 6.) Following Henry
Bamberger’s death, Defendant claimed to have purchased his company—Bamberger
Business Management Company—from him prior to his death. (Id., ¶¶ 5, 12.) At the time, the Bamberger family had no
reason to question Defendant’s representation.
(Id., ¶ 12.) Defendant had been a
“long-time trusted employee;” Defendant and her husband had done “tax work” for
the Bamberger family; and Defendant continued to perform fiduciary management
services for the remaining family members.
(Ibid.)
Plaintiff’s mother, Margot
Bamberger became the sole trustee and beneficiary of the trust on September 12,
2012. (Id., ¶ 6) Plaintiff alleges that she “was extremely
unsophisticated and unknowledgeable as to business and financial matters.” (Id., ¶ 20.)
Margot Bamberger died over three years later, on January 30, 2016. (Id., ¶ 7.)
Upon her death, Plaintiff and his brother, Mark Bamberger, became
co-trustees and equal beneficiaries under the trust. (Ibid.)
Then, about four years after Margot Bamberger’s death, in early 2020,
the trust was in the process of distributing all assets and being
dissolved. (Id., ¶ 13.) “At that time, John Bamberger became curious
as to the terms of the alleged purchase and sale agreement between Henry
Bamberger and Linda Judd.” (Ibid.)
Plaintiff
alleges that Defendant committed fraud by misrepresenting that his father sold
his business to her. Plaintiff alleges
that there was no purchase and sale agreement between Henry Bamberger and Linda
Judd. (Id., ¶ 15.) Defendant claimed that the agreement was
entirely oral, and the terms of the agreement were that she would pay five
percent of the revenues over a 24-month period, from November 2010, to November
2012. (Ibid.) Plaintiff alleges that this explanation is
false because his father worked during this time period, meaning that Defendant
“paid nothing out of her own pocket.”
(Ibid.) Regardless, Plaintiff
alleges that an oral agreement under these circumstances violates the statute
of frauds. (Ibid.) Moreover, Plaintiff discovered “anomalies
that are completely inconsistent with a contract having been made on the terms
claimed by Linda Judd through Donna Valentino.”
(Id., ¶ 16.) For example, the
checks paid to Henry Bamberger during this time period “contained no indication
that they were payment for the purchase of the business.” (Id., ¶ 17.)
PRIOR RULING
The Court
sustained the demurrer based upon the statute of limitations. The Court incorporates its order of August
21, 2023, by reference as follows:
[T]he Court sustains the demurrer
based upon the statute of limitations. It
is Plaintiff’s duty to allege sufficient facts demonstrating that this action
is timely. Plaintiff concedes that the
statute of limitations for claims sounding in fraud is three years, per Code of
Civil Procedure section 338(d). In the
first amended complaint, Plaintiff alleges that the alleged misrepresentation
was made on or shortly after September 12, 2012, the date of Henry Bamberger’s
death. This case was filed almost ten years
later, on April 7, 2022.
Plaintiff relies on the delayed
discovery rule, “which postpones accrual of a cause of action until the
plaintiff discovers, or has reason to discover, the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc.
(2005) 35 Cal.4th 797, 807.) In other
words, a claim does not accrue until “a plaintiff knew or should have known of
the wrongful conduct at issue.” (April
Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 832.) However, the delayed discovery rule contains
a due diligence component. “The Legislature,
in codifying the discovery rule, has also required plaintiffs to pursue their
claims diligently by making accrual of a cause of action contingent on when a
party discovered or should have discovered that his or her injury had a
wrongful cause.” (Fox, supra, 35 Cal.4th
at p. 808, citing Code Civ. Proc., §§ 340.1(a), 340.2, 340.5, 340.15(a)(2).) In order to rely on the delayed discovery
rule, “[a] plaintiff whose complaint shows on its face that his claim would be
barred without the benefit of the delayed discovery rule must specifically
plead facts to show (1) the time and manner of discovery and (2) the inability
to have made earlier discovery despite reasonable diligence.” (Ibid.)
Plaintiff fails to do so. There are no facts in the operative complaint
explaining why Defendant’s alleged fraud could not have been discovered through
the exercise of “reasonable diligence” between September 12, 2012, and early
2020, when he finally “became curious” about the sale. For example, there are no allegations that
Defendant engaged in lulling conduct, like providing false information between
2012 and 2020, to dissuade any investigation or to lull Plaintiff into
complacency. Nor are there any allegations
that Defendant failed to provide information in violation of a duty to do
so. Simply, there are no facts
explaining why Plaintiff’s mother and later Plaintiff could not have discovered
this issue “through the exercise of reasonable diligence” between the time of
the misrepresentation and early 2020 when Plaintiff finally “became
curious.”
Plaintiff alleges that his mother
“was extremely unsophisticated and unknowledgeable as to business and financial
matters.” (Complaint, ¶ 20.) Unless Plaintiff’s mother was legally
incompetent, this is not a basis to toll the statute of limitations. Regardless, it is undisputed that Plaintiff
became a trustee of the trust on or about January 30, 2016. Plaintiff alleges no facts showing that he
could not have discovered the alleged fraud through the exercise of “reasonable
diligence” between January 30, 2016, and January 30, 2019.
At the hearing, Plaintiff’s counsel
cited a case that was not included in his written opposition: Krilikowski v.
San Diego City Employees’ Retirement System (2018) 24 Cal.App.5th 537. This case does not benefit Plaintiff’s
position. In that case, two city
employees received pension payments in 2000 and 2006, respectively, but in
2013, the pension fund discovered that it had calculated the pensions
incorrectly and sought to recover the overpayments. After exhausting their administrative
remedies, the city employees filed complaints challenging the pension fund’s
recoupment of the overpayments. On
appeal, the city employees argued that the statute of limitations should start
running from the date of the mistaken calculations (2000 and 2006) and not the
date of discovery (2013) because the pension fund “always had available the
information with which it could correctly determine the pension benefits, and
[the pension fund] was therefore negligent in not discovering the errors more
promptly.” (Id., p. 562.) The Fourth District rejected that argument
holding:
“In many cases it has been said that means of knowledge are
equivalent to knowledge. This is true,
however, only where there is a duty to inquire, as where plaintiff is aware of
facts that would make a reasonably prudent person suspicious. . . . Where not duty is imposed by law upon a
person to make inquiry, and where under the circumstances ‘a prudent man’ would
not be put upon inquiry, the mere fact that means of knowledge are open to a
plaintiff, and he has not availed himself of them, does not debar him from
relief when thereafter he shall make actual discovery.”
(Id., pp. 562-563, citations omitted.) As an initial matter, the opinion in
Krilikowski cites the California Supreme Court’s decision Hobart v. Hobart
Estate Company (1945) 26 Cal.2d 412.
Sixty years later, the California Supreme Court decided Fox v.
Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, which contains a clear
formulation of the rule: “A plaintiff whose complaint shows on its face that
his claim would be barred without the benefit of the delayed discovery rule
must specifically plead facts to show (1) the time and manner of discovery and
(2) the inability to have made earlier discovery despite reasonable
diligence.” (Id., p. 808) Regardless, Plaintiff still does not benefit
from the Hobart case because he had a duty to inquire once he became a
trustee (on or about January 30, 2016).
A trustee has a fiduciary duty to manage and use the trust’s assets for
the benefit of the trust beneficiaries.
Therefore, Plaintiff had a duty to make reasonable inquiries when he
became the trustee, and he alleges no facts showing that he could not have
discovered the alleged fraud through the exercise of “reasonable diligence”
between January 30, 2016, and January 30, 2019.
In his opposition, Plaintiff
argues: “[I]t is not enough for a plaintiff to be aware of a representation;
the plaintiff must know it was a misrepresentation for the claim to accrue for
statute of limitations purposes.”
(Plaintiff’s Opposition, p. 11:24-26.)
Plaintiff’s argument omits the dispositive law: For the claim to accrue
for statute of limitations purposes, the plaintiff must know—or should have
known through the exercise of due diligence—it was a misrepresentation. Plaintiff’s counsel attempts to limit delayed
discovery to actual knowledge, but such a limitation would reward the plaintiff
who does not exercise due diligence and would toll statutes of limitations in
perpetuity based upon dilatory conduct or willful blindness. In this case, the issue is whether, through
the exercise of reasonable diligence, Margot Bamberger should have known within
three years of becoming the trustee (September 12, 2012) that there was fraud,
and if so, whether Plaintiff should have known within three years of becoming a
trustee (January 30, 2016) that there was fraud. The operative complaint alleges no facts
suggesting that the action is timely.
At the hearing, Plaintiff’s counsel
argued that Defendant had a fiduciary relationship with Plaintiff, which was
the reason he did not make inquiries concerning the sale of his father’s
business. If the plaintiff is in a
fiduciary relationship with the defendant, his burden of discovery is reduced because
he is entitled to rely on the statements and advice provided by the
defendant. (Sherman v. Lloyd (1986) 181
Cal.App.3d 693, 698-699.) However,
again, in this case, there are no allegations that Defendant made any
misrepresentations or engaged in any lulling conduct between 2012 and early
2020 or otherwise used her status as a fiduciary to preclude Plaintiff from
investigating the issues.
Based upon the foregoing, the Court
sustains the demurrer. The Court does
not believe Plaintiff will be able to allege facts demonstrating that this
action is timely. Therefore, the Court
issues an Order to Show Cause why the Court should permit leave to amend under
these circumstances. The Court orders
Plaintiff’s counsel to file a response which includes all facts that would be
included in a second amended complaint to establish that the action is timely
under the delayed discovery rule. The
Court provides notice: Unless Plaintiff demonstrates that an amendment would be
successful, the Court does not intend to grant leave to amend and would order
the case to be dismissed with prejudice.
ORDER TO SHOW CAUSE
The Court
issued an order to show cause why leave to amend should be granted. Plaintiff’s response to the Court’s order to
show cause articulates no facts suggesting that the delayed discovery rule
would apply. A trustee has a fiduciary
duty to manage the trust and its assets, and to recover wrongfully lost assets. (See, e.g., King v. Johnston (2009) 178
Cal.Ap.4th 1488, 1507.) As discussed,
Defendant’s alleged misrepresentation that Plaintiff’s father sold her the
business was made on or shortly after September 12, 2012, the date of Henry
Bamberger’s death. Plaintiff’s mother,
as trustee, did nothing to investigate the circumstances of the alleged sale
before her death on January 30, 2016.
Plaintiff and his brother, as trustees, did nothing to investigate the
circumstances of the alleged sale until early 2020. Plaintiff only investigated the transaction
when he “became curious as to the terms of the alleged purchase and sale
agreement between Henry Bamberger and Linda Judd.” (Complaint, ¶ 13.) But Plaintiff’s curiosity had nothing to do
with the transaction itself. Rather, Plaintiff
concedes that he became curious because he “was concerned and troubled by the
outspoken devotion of Linda Judd, as representative of a business that used his
family name, to the then President Donald J. Trump.” (Ibid.)
Plaintiff’s
proffer alleges that Defendant was a fiduciary.
For example, Plaintiff alleges as follows: “When Plaintiff became the
Trustee in 2016, all documents and information concerning the Trust’s assets
and affairs were in Judd’s and Valentino’s hands. As trustee, Plaintiff was dependent on Judd
and Valentino for all information concerning the Trust’s assets and affairs. Judd and Valentino controlled all
Trust-related bank accounts, had signing authority for those bank accounts and
paid all related invoices. . . .
Plaintiff relied on Judd and Valentino to ensure that the Trust matters
were handled properly.” (Plaintiff’s
Response to OSC, ¶ 9.) Plaintiff also
alleges: “When Plaintiff reviewed the information that Judd and Valentino
provided concerning the Trust’s assets, there was nothing to indicate that
Henry had not sold the business to Judd, as Judd and Valentino had previously
represented.” (Plaintiff’s Response to
OSC, ¶ 10.)
These
factual allegations are not sufficient because Plaintiff does not clearly
allege that Defendant and Valentino did anything between 2012 and 2020 to
conceal the misrepresentation (that Plaintiff’s father sold the business to
Defendant) or dissuade Plaintiff from conducting due diligence on the
transaction. There are no allegations
that Defendant continued to repeat the alleged misrepresentation between 2012
and 2020, which lulled Plaintiff into complacency. There are no allegations that Defendant “provided
shifting responses which did not make sense” between 2012 and 2020. Plaintiff alleges that there was no evidence to
contradict Defendant’s story, but he does not allege that Defendant created
false documents and/or destroyed documents between 2012 and 2020 to make it
appear as though the business was sold.
Plaintiff alleges that Defendant had all of the relevant documents of
the trust, but he does not allege that, before 2020, he requested documents or
information about the sale and was rebuffed or dissuaded from pursuing in the
inquiry. In fact, Plaintiff does not
allege that he was prevented from investigating the issue in any way between
2016 (when he became the trustee) and 2020.
Nor does Plaintiff allege that he could not have performed the same
investigation in 2016 that he performed in 2020, when he became “curious.” Simply, Plaintiff does not allege facts
demonstrating that he, as trustee, had an “inability to have made earlier
discovery despite reasonable diligence.”
(Fox, supra, 35 Cal.4th at p. 808.)
Plaintiff
relies exclusively on the fact that the parties had a fiduciary
relationship. That is not enough. “Such a relationship compels a rule of
delayed accrual to avoid barring a victim of wrongful conduct from asserting a
cause of action before he could reasonably be expected to discovery its
existence.” (April Enterprises,
supra, 147 Cal.App.3d at p. 827.) The
existence of a fiduciary relationship may make it less likely or impossible for
a plaintiff to have discovered the fraud, but those facts must be alleged. The existence of a fiduciary relationship does
not excuse a plaintiff’s requirement to act with “reasonable diligence,” per
the California Supreme Court’s holding in Fox v. Ethicon Endo-Surgery, Inc.,
35 Cal.4th 797, and tolls the statute only to the point “he could reasonably be
expected to discover [the wrongful conduct’s] existence.”
Plaintiff
relies on Parsons v. Tickner (1995) 31 Cal.App.4th 1513, but that case
is distinguishable. In that case, when
Gram Parsons died, his managers (the defendants) falsely claimed that Parsons
had transferred his copyrights in exchange for a percentage of the income
generated by recording, production, and other uses of the songs. The defendants paid Parsons’ daughter (the
plaintiff) the purported royalties until she discovered years later that there
were no documents or agreements evidencing the transaction. The Second District held that the statute of
limitations had been tolled, but this decision was based on two factors not
present in the instant case. First, the
Second District noted that there is no evidence that the plaintiff “had any
duty or reason to inquire as to the veracity of [the defendants’]
representations.” (Id., at p. 1527.) By contrast, Plaintiff was the trustee, who
has a fiduciary duty to manage the trust and recover wrongfully displaced
assets. Second, the Second District
noted that the defendants continued to make payments to the plaintiff—i.e.,
lulling payments—which acted as a fraudulent concealment. (Ibid.)
In the instant case, Plaintiff had a duty of inquiry when he became the trustee
in 2016, and there are no allegations that Defendant made any lulling payments
or did anything to conceal the alleged fraud.
In sum, Plaintiff
articulates no facts suggesting that his mother acted with reasonable diligence
when she became the trustee in 2012, or that Plaintiff acted with reasonable
diligence when he became the trustee in 2016.
Plaintiff articulates no facts suggesting that Defendant did anything to
dissuade or prevent Plaintiff’s mother or Plaintiff from learning the same
information he learned in 2020, which gave rise to this action. Essentially, Plaintiff’s interpretation of
the delayed discovery rule is that the mere existence of a fiduciary
duty—without anything more—tolls the statute of limitations in perpetuity until
a plaintiff becomes “curious.” The Court
is unwilling to adopt an interpretation of the rule that omits the requirement
for a plaintiff to act with “reasonable diligence.”
CONCLUSION AND ORDER
The Court
previously sustained Defendant’s demurrer.
Following written notice and opportunity to be heard, the Court now
orders as follows:
1. The
Court advances and vacates all dates.
2. The
Court orders that this case shall be dismissed with prejudice.
3. Defendant’s
counsel shall provide notice and file proof of such with the Court.