Judge: Stephen I. Goorvitch, Case: 22STCV16831, Date: 2022-10-14 Tentative Ruling

Case Number: 22STCV16831    Hearing Date: October 14, 2022    Dept: 39

Original Balboa Caregivers, Inc., et al. v. Michael Moussa Yedidsion, et al.

Case No. 22STCV16831

Demurrer

INTRODUCTION

            Plaintiffs Original Balboa Caregivers, Inc. and Basil Bailey (collectively, “Plaintiffs”) filed this action against S.S.L. Investments (“Defendant SSL”), as well as Michael Moussa Yedidsion (“Defendant Yedidson”), Pedram Salimpour (“Defendant Salimpour”), Bob Kashani (“Defendant Kashani”), and 9419 Mason Partners LLC (“9419 Mason Partners”), among others, asserting the following causes of action:

            1.         Breach of implied contract

            2.         Intentional misrepresentation

            3.         Negligent misrepresentation

            4.         Negligence

            5.         Breach of fiduciary duty

            6.         Conversion

            7.         Accounting

            8.         Restitution based upon unjust enrichment

            9.         Unfair competition under Business and Professions Code section 17200

            10.       Elder abuse

Defendants demur to each cause of action, which Plaintiffs oppose.  The Court sustains the demurrer to the third and eighth causes of action without leave to amend.  The Court sustains the demurrer with respect to every defendant except Defendant SSL with leave to amend. 

PLAINTIFFS’ ALLEGATIONS

            Original Balboa was a business licensed by the State of California and the City of Los Angeles to conduct legal cannabis cultivation, manufacturing, distribution, and retail sales.  (Complaint, ¶ 19.)  Plaintiff Basil Bailey is Original Balboa’s  sole shareholder.  (Ibid.)  Defendant SSL is a California limited liability company, and its members are Defendants Yedidsion, Salimour, and Kashani.  (Id., ¶ 9.) 

            In March 2018, an individual named Christos Georgitsis had several meetings with Defendants Yedidsion, Salimour, and Kashani concerning performing cannabis remediation services for their company, Defendant SSL.  (Id., ¶ 21.)  Defendant Yedidsion told Georgitsis that he owned a location in North Hollywood that would be ideal for a cannabis business and he was looking for a cannabis license holder to transfer the license to that location.  (Ibid.)  At that time, Georgitsis was aware that Original Balboa was considering moving its license to a new location, so he contacted Original Balboa’s business manager and then arranged a meeting between the parties.  (Id., ¶¶ 22-23.) 

            On or about April 15, 2018, representatives of Original Balboa were shown the retail location in North Hollywood, which was falsely represented as being owned by Defendant SSL.  (Id., ¶ 24.)  Afterwards, Defendants Yedidsion and Salimour suggested that Original Balboa instead move to another property they owned, which was on Mason Avenue (the “Mason Property”), because it would be “more lucrative for everyone.”  (Id., ¶ 24.)  The Mason Property is located in Chatsworth and has approximately 100,000 square feet of industrial warehouse space and is divided into seven units.  (Id., ¶ 25.)  The parties intended to operate different cannabis businesses out of each unit, including retail, finished goods, oil extraction, remediation, manufacturing, and distribution.  (Ibid.) 

            On or about April 17, 2018, Plaintiff Bailey, as well as his business manager and Georgitsis, met with Defendants Yedidsion and Salimour at the Mason Property to tour its facilities.  (Id., ¶ 26.)  During the tour Defendants Yedidsion and Salimour expressed an interest in using Original Balboa’s license to operate multiple different cannabis businesses at that location.  (Id., ¶¶ 26-27.)  They agreed to fund the project and misrepresented that they had a cannabis extraction business in Compton that would be moved to the Mason Property.  (Id., ¶ 27.)  Defendants Yedidson and Salimour proposed that Original Balboa would partner with Defendant SSL and operate Original Balboa’s business out of the Mason Property.  (Id., ¶¶ 27,  28.) 

            The parties had discussions, during which Defendants Yedidsion and Salimour made the following misrepresentations: (1) The research and development operations would become a pharmaceutical company worth billions of dollars; (2) They would research and create medications approved by the FDA; (3) Verdant was a licensed cannabis distributor in Los Angeles that was projected to earn $150 million per year; and (4) The Mason Property was zoned for retail cannabis operation.  (Id., ¶ 35.)  They also represented that 9419 Mason Partners would pay for the build-out of the Mason Property, but failed to obtain the necessary permits, jeopardizing Original Balboa’s license and potential business deals.  (Id., ¶ 34(d).)  The parties also negotiated the compensation and ownership structure.  (Id., ¶ 34.) 

            Defendants Yedidsion and Salimour presented Original Balboa with a letter of intent, dated May 15, 2018.  “However, this Letter of Intent provides that it is not a binding agreement and did not set forth all of the terms of the agreements to be entered or the ownership and profit percentages previously discussed (and recited above) by the parties.”  (Id., ¶ 36.)  In reliance on Defendants Yedidsion and Salimour’s oral representations, Original Balboa began the process to transfer its cannabis license to the Mason Property.  (Id., ¶ 37.) 

            The parties subsequently discussed their plans for moving forward, and the ownership and profit percentages were not consistent with what had been discussed previously.  (Id., ¶ 40.)  Defendant Yedidsion allegedly coerced Bailey, a senior citizen to sign a lease agreement between Original Balboa and 9419 Mason Partners stating that it was not intending to be a real lease.  (Id., ¶ 44.)  Defendant Yedidsion later forged Bailey’s signature on an amended lease, and he used the leases for filings with the State licensing authorities.  (Ibid.)  Defendant Yedidsion misappropriated Original Balboa’s revenue and entered into agreements with third parties on behalf of Original Balboa without its consent.  (Id., ¶¶ 45, 50.) 

            In sum, Defendants SSL, Yedidsion, and Salimpour breached the implied contract by improperly asserting control over Original Balboa and its business, improperly using its license, failing to provide it with its share of profits, and by misappropriating its profits, equipment, and inventory.  (Id., ¶ 67.)  As a direct result of Defendants’ breaches, Original Balboa’s business has been halted, and its license has been impacted.  (Id., ¶ 62.) 

LEGAL STANDARD

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In ruling on a demurrer, the court must “liberally construe[]” the allegations of the complaint.  (Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)

DISCUSSION

            A.        Third Cause of Action  

            Plaintiff’s third cause of action is for negligent misrepresentation.  Plaintiff’s theory of the case is that Defendants falsely promised what they would do after starting their joint venture.  This does not give rise to a negligent misrepresentation claim because there is no cause of action for “the negligent false promise.”  (Tarmann v. State Farm Mutual Automobile Insurance Company (1991) 2 Cal.App.4th 153, 159.)  To the extent there is any independent basis for this cause of action, it is duplicative of the fourth cause of action for negligence.  Therefore, the Court sustains the demurrer to the third cause of action without leave to amend.

            B.        Eighth Cause of Action

            Plaintiff’s eighth cause of action is for restitution based upon unjust enrichment.  This is a remedy, not a cause of action.  (Melchior v. New Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 794.)  Therefore, the Court sustains the demurrer to the eighth cause of action without leave to amend.

            C.        Claims Against All Defendants Except Defendant SSL

            Defendants ask the Court to take judicial notice of the “Agreement to Terminate Business Venture, dated March 1, 2020.”  Governing contracts are subject to judicial notice as propositions not reasonably subject to dispute.  (Ascherman v. General Reinsurance Corp. (1986)  183 Cal.App.3d 307, 310-311.)  There is no opposition to this request.  Therefore, the Court takes judicial notice of this document. 

The agreement, which is between Original Balboa and Defendant SSL, states: “Balboa [Caregivers] hereby transfers and assigns to S.S.L. all claim(s), demands, and cause or causes of action of any kind whatsoever which Balboa has or may have against any third parties (not party to this Agreement), arising from any business conducted by the Parties as part of the Venture.”  (Request for Judicial Notice, Exh. #2, ¶ 3.)  The complaint makes clear that this action arises from the joint business venture between Original Balboa and Defendant SSL.  Therefore, the Court sustains the demurrer with every defendant except Defendant SSL.  The Court notes that although the agreement was signed by H. Troy Farahmand, the agreement makes clear that he is not a party and was signing in his official capacity on behalf of Defendant SSL. 

Plaintiff argues that the agreement is unenforceable.  The Court grants leave to amend so Plaintiff can allege facts addressing this issue.  However, the Court notes that the complaint does not allege any basis for liability against Defendant Kashani, and Plaintiffs must remedy that issue in the amended complaint.    

            D.        Claims Against Defendant SSL   

            The Court rules as follows on the remaining issues in the demurrer: 

                        1.         First Cause of Action – Overruled.  To state a cause of action for breach of implied contract, Plaintiffs must allege that Defendant SSL’s conduct implied the existence of a contract, that Plaintiffs performed under that implied contract, that Defendants breached the implied contract, and that Plaintiffs sustained damages.  (Gomez v. Lincare, Inc. (2009) 173 Cal.App.4th 508, 525.)  The complaint alleges sufficient facts.    

            2.         Second Cause of Action – Sustained with leave to amend.  Plaintiffs must allege fraud with particularity.  “This means: (1) general pleading of the legal conclusion of fraud is insufficient; and (2) every element of the cause of action for fraud must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a pleading that is defective in any material respect.”  (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331.)  To state a claim for promissory fraud, Plaintiffs must allege specific factual circumstances beyond contract breach, which reflect Defendants’ contemporaneous intent not to perform.  (Hills Transportation Co. v. Southwest Forest Ind., Inc. (1968) 266 Cal.App.2d 702, 707.)  Here, Plaintiffs allege, “they intended to improperly assert control over Original Balboa and its business, in that they did not intend to provide Original Balboa with its share of profits, and, instead, intended to misappropriate Original Balboa’s property and income.”  (Complaint, ¶ 72.)  Plaintiffs fail to allege specific facts to show that Defendants did not intend to perform at the time they made the alleged agreements with Plaintiffs. 

            3.         Fourth Cause of Action – Sustained with leave to amend with respect to Defendant Kashani.  Overruled in the alternative with respect to Defendant Vosogh.  Plaintiffs’ allege that Defendant Vosogh was their agent for purposes of collecting Original Balboa’s earnings, and that he misappropriated funds he collected.  (Complaint, ¶ 61.)  As such, Plaintiffs have alleged that Vosogh owed fiduciary duties to Plaintiffs.  (Civ. Code, § 2322, subd. (c).) 

            4.         Fifth Cause of Action – Sustained with leave to amend with respect to Defendant Kashani.  Overruled in the alternative with respect to Defendant Vosogh.  Plaintiffs’ allege that Defendant Vosogh was their agent for purposes of collecting Original Balboa’s earnings, and that he misappropriated funds he collected.  (Complaint, ¶ 61.)  As such, Plaintiffs have alleged that Vosogh owed fiduciary duties to Plaintiffs.  (Civ. Code, § 2322, subd. (c).) 

            5.         Sixth Cause of Action – Sustained with leave to amend with respect to Defendant Kashani.  Overruled in the alternative with respect to Defendant Vosogh.  Plaintiffs’ allege that Defendant Vosogh was their agent for purposes of collecting Original Balboa’s earnings, and that he misappropriated funds he collected.  (Complaint, ¶ 61.)  As such, Plaintiffs have alleged that Vosogh owed fiduciary duties to Plaintiffs.  (Civ. Code, § 2322, subd. (c).) 

            6.         Seventh Cause of Action – Sustained with leave to amend with respect to Defendant Kashani.  Overruled in the alternative with respect to Defendant Vosogh.  Plaintiffs’ allege that Defendant Vosogh was their agent for purposes of collecting Original Balboa’s earnings, and that he misappropriated funds he collected.  (Complaint, ¶ 61.)  As such, Plaintiffs have alleged that Vosogh owed fiduciary duties to Plaintiffs.  (Civ. Code, § 2322, subd. (c).) 

            7.         Ninth Cause of Action – Sustained with leave to amend.  Plaintiffs must allege a claim under the Unfair Competition Law “with reasonable particularity . . . .”  (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.)  Here, Plaintiffs simply incorporate by reference the other allegations of the complaint, without specifying which allegations form the basis of the claim. 

            8.         Tenth Cause of Action – Sustained with leave to amend.  Bailey claims that Defendants committed elder abuse by taking control of Original Balboa.  (See Complaint, ¶ 124.)  Bailey’s claim for elder abuse “does not originate in circumstances independent of his status as a shareholder” of Original Balboa.  (Hilliard v. Harbour (2017) 12 Cal.App.5th 1006, 1015.)  In other words, Plaintiff Bailey must allege that Defendants deprived him of his property, i.e., they induced him to sign over his money, his shares, etc. 

CONCLUSION AND ORDER

            Based upon the foregoing, the Court orders as follows:

            1.         The demurrer is sustained to the third and eighth causes of action without leave to amend.

            2.         The demurrer is sustained with respect to every defendant except Defendant SSL with leave to amend.

            3.         The demurrer is sustained in part and overruled in part with respect to Defendant SSL as discussed in this order.

            4.         Plaintiff shall file an amended complaint within thirty (30) days.

            5.         The Court continues the case management conference to December 13, 2022, at 8:30 a.m.

            6.         Defendants’ counsel shall provide notice and file proof of such with the Court.