Judge: Teresa A. Beaudet, Case: 19STCP04298, Date: 2023-05-25 Tentative Ruling

Case Number: 19STCP04298    Hearing Date: May 25, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

On October 3, 2019, Plaintiffs Fachuan Bai, Lingyun Bian, Yun Cao, Lan Deng, Jian He, Jianchang He, Yidan Hu, Jiange Le, Xizi Huang, Li Jian, Zhengbin Li, Zhihua Li, Xianniu Lin, Ya Liu, Chunying Nie, Shiyao Pang, Guoping Shen, Yiqun Shen, Jingzhi Wang, Shizhong Wang, Shuyi Wang, Zhiqiang Xie, Xiaochen Yang, and Xinhong Zhao filed this action against Defendant Park Place EB5, LP (“Park Place”).[1] The Complaint asserts causes of action for (1) violation of Uniform Limited Partnership Act, (2) breach of partnership agreement, (3) breach of contract, and (4) declaratory relief. 

On November 20, 2019, Park Place filed a Cross-Complaint against plaintiffs, asserting  causes of action for (1) intentional misrepresentation, (2) negligent misrepresentation, (3) breach of contract, (4) anticipatory breach of contract, (5) breach of implied covenant of good faith and fair dealing, (6) promissory estoppel, (7) declaratory relief, (8) breach of contract, and (9) intentional interference with contractual relations. 

On October 28, 2022, Park Place filed a request for dismissal of the Cross-Complaint without prejudice. Dismissal was entered on the same date.

All of the plaintiffs in this action except for Xizi Huang (collectively, “Plaintiffs”) now move “for a prevailing parties finding and for an award of attorney fees.” Park Place opposes.

Discussion

Prevailing Party

Plaintiffs note that under Code of Civil Procedure section 1032, subdivision (a)(4), a “prevailing party” includes “the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.” (Emphasis added.) Pursuant to Code of Civil Procedure section 1032, subdivision (b), “[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”

As set forth above, on October 28, 2022, Park Place filed a request for dismissal of the Cross-Complaint without prejudice. Plaintiffs argue that they “are the prevailing parties because they are cross-defendants against whom Park Place did not recover any relief and parties that recovered ‘other than monetary relief’ based on their complaint, as explained above.” (Mot. at   p. 8:20-23.) The Court notes that it is not entirely clear what “other than monetary relief” Plaintiffs are referring to. It appears Plaintiffs could be referring to the Court’s December 4, 2020 Order granting Plaintiffs’ motion for preliminary injunction. 

Entitlement to Attorney’s Fees

Plaintiffs indicate that they move “pursuant to Code of Civil Procedure sections 1032, and 1717” for an award of attorney’s fees. (Mot. at p. 2:8-9.) It appears Plaintiffs are referring to Civil Code section 1717, as this provision is cited in the motion.

Civil Code section 1717, subdivision (a) provides that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717, subd. (a).)

Plaintiffs’ former counsel attaches as Exhibit 3 to his declaration a “Confidentiality and Non-Disclosure Agreement Governing the Inspection of Books and Records” (herein the “NDA”) (Mickadeit Decl., ¶¶ 1, 5, Ex. 3.) Plaintiffs assert that “the [Plaintiffs] are allowed their fees based on the NDA, as costs under section 1032.” (Mot. at p. 9:27-28.) Plaintiffs note that Paragraph 12 of the purported NDA provides that “[p]revailing party to any action dispute [sic] arising from this Agreement shall be entitled to reasonable attorney’s fees and costs.” (Mickadeit Decl., ¶ 5, Ex. 3, ¶ 12.)

Plaintiffs acknowledge that Civil Code section 1717, subdivision (b)(2) provides, inter alia, that “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” As set forth above, Park Place’s Cross-Complaint was dismissed in this action. Plaintiffs cite to Santisas v. Goodin (1998) 17 Cal.4th 599, 602, where the California Supreme Court “conclude[d] that in voluntary pretrial dismissal cases, Civil Code section 1717 bars recovery of attorney fees incurred in defending contract claims, but that neither Civil Code section 1717 nor Olen, supra, 21 Cal. 3d 218, bars recovery of attorney fees incurred in defending tort or other noncontract claims. Whether attorney fees incurred in defending tort or other noncontract claims are recoverable after a pretrial dismissal depends upon the terms of the contractual attorney fee provision.”

Plaintiffs contend that “[t]he cross-complaint and complaint are both voluntarily dismissed (the complaint is to be dismissed as this motion is decided), so there is no prevailing party with respect to the breach of contract causes of action in the cross-complaint or the complaint. But there are prevailing parties – the [Plaintiffs] - for the statutory claim (complaint, first cause of action) and the declaratory relief claim (fourth cause of action) in the complaint. Also, there are still prevailing parties – the [Plaintiffs] - with respect to the non-contract cause of action (the ninth cause of action for $10 million based on a tort theory) in the cross-complaint.” (Mot. at p. 9:7-13.)  

In the opposition, Park Place asserts that Plaintiffs are not entitled to attorney’s fees. Park Place asserts the instant action is not an action “on” the NDA. As set forth above, Plaintiffs rely on the purported NDA as the basis for their request for attorney’s fees. Park Place notes that “[i]n determining whether an action is ‘on the contract’ under section 1717, the proper focus is not on the nature of the remedy, but on the basis of the cause of action.” (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 347.) “An action (or cause of action) is ‘on a contract’ for purposes of section 1717 if (1) the action (or cause of action) ‘involves’ an agreement, in the sense that the action (or cause of action) arises out of, is based upon, or relates to an agreement by seeking to define or interpret its terms or to determine or enforce a party’s rights or duties under the agreement, and (2) the agreement contains an attorney fees clause.” (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 241-242.)

As noted by Park Place, Plaintiffs allege in the Complaint that “[i]n or around 2007, a real estate developer named Kin Hui (“Hui”) caused to be formed Park Place Commercial, L.P. (“Park Place Commercial”)…” (Compl., ¶ 31.) “In or around August 2007, Park Place Commercial acquired the historic Hotel Constance on Colorado Boulevard in Pasadena, with the stated intent of making significant improvements and additions to the aging structure (the “Hotel Project”).” (Compl., ¶ 32.)

The Complaint further alleges that “[i]n or about April 2010, Hui caused to be formed Invest L.A. and Park Place EB5, with Invest L.A. the sole general partner of the Park Place EB5 limited partnership. Park Place EB5 would later acquire an interest in Park Place Commercial…” (Compl., ¶ 33.) Plaintiffs allege that “[i]n late 2010, the U.S. Department of Homeland Security designated Invest LA a ‘regional center’ for purposes of participating in the federal government’s Immigrant Investor Pilot Program, also known as the EB-5 Program. Under the government’s EB-5 Program, a limited number of EB-5 visas are issued to immigrants seeking permanent resident status on the basis of their capital investment in a commercial enterprise that creates a certain minimum number of jobs.” (Compl., ¶ 34.)

The Complaint alleges that “[i]n 2011 and 2012, based upon the promises made by Park Place EB5, Invest L.A., and their employees, agents, and representatives, Plaintiffs each invested either $540,000 or $550,000.” (Compl., ¶ 42.) Plaintiffs allege that “potential investors were told, Park Place EB5 would use the investment proceeds to acquire up to a 36.98 percent limited partnership interest in Park Place Commercial, which, through the Hotel Project, would create the jobs required under the federal program.” (Compl., ¶ 38.) “Each Plaintiff entered into a partnership agreement with Park Place EB5 by which they each became a limited partner. Investors initially signed one of two versions of the partnership agreement, either the original agreement (“Original Partnership Agreement”), or a Partnership Agreement purported to be amended July 15, 2011 (the “Amended Partnership Agreement”)…” (Compl., ¶ 43.) Plaintiffs refer to the Original Partnership Agreement and the Amended Partnership Agreement jointly as the “Partnership Agreements” in the Complaint. (Compl., ¶ 43.)

Plaintiffs allege that “some seven to eight years after the Plaintiffs made their investments, none of the Plaintiffs have received any distribution whatsoever and the liquidation and winding up has not occurred. Plaintiffs have repeatedly asked Park Place EB5, through its general partner, Invest L.A., for access to Hotel Project records, but have not received the full and complete records to which they are entitled.” (Compl., ¶ 46.)

Plaintiffs contend that the first and fourth causes of action of the Complaint arise out of the NDA. (Reply at p. 8:3-4.)

However, in support of the first cause of action for violation of Corporations Code section 15901.11(b), Plaintiffs allege that “Corporations Code section 15910.01 allows limited partners to bring a direct action against the limited partnership or another partner for legal or equitable relief to enforce the rights and otherwise protect the interests of the partner, including rights arising under the Uniform Limited Partnership Act, the partnership agreement, or act arising independently of the partnership relationship.” (Compl., ¶ 67.) Plaintiffs allege that they “requested to inspect and copy information for a purpose reasonably related to their interest as a limited partner in Park Place EB5,” and that “[t]he information sought (the Requested Documents) is both reasonably related to the Plaintiffs’ interests as limited partners in Park Place EB5 and directly connected to the limited partners’ purposes…” (Compl., ¶ 68.) Plaintiffs allege that “Park Place EB5, through its general partner, Invest L.A., have unreasonably denied the limited partners’ request to inspect and copy the Requested Documents.” (Compl., ¶ 69.)

The first cause of action does not mention the purported NDA. As Park Place notes, there is no allegation in the first cause of action of any breach of the purported NDA. In addition, as further noted by Park Place, the Partnership Agreements are the only agreements attached to the Complaint. (Compl., ¶ 43, Exs. B-C.)

In support of the fourth cause of action for declaratory relief, Plaintiffs allege that “[a]n actual controversy has arisen between the Plaintiffs, and each of them, on one hand, and the Defendant, on the other hand, with respect to Plaintiffs’ rights to inspect and copy documents and Defendant’s duty to provide them pursuant to the Partnership Agreements. Plaintiffs contend that under the Partnership Agreements, Plaintiffs have a right to ‘receive’ any and all documents [sic] Park Place EB5’s possession, custody, or control so long as they are ‘concerning the business and affairs of the Partnership,’ and, further, that any and all information regarding the Hotel Project concerns the business and affairs of the Park Place EB5 partnership. Furthermore, Plaintiffs contend that under the Partnership Agreements, they have an absolute right to receive such documents and Defendant may not impose conditions on Plaintiffs, such as requiring them to sign a nondisclosure agreement or any other restrictive agreement. Defendant disputes this right.” (Compl., ¶ 95.)[2]

Although Plaintiffs allege in the fourth cause of action that “Defendant may not impose conditions on Plaintiffs, such as requiring them to sign a nondisclosure agreement” (Compl.,       ¶ 95), the Court agrees with Park Place that Plaintiff’s fourth cause of action (and first cause of action) are not causes of action “on” the purported NDA. As set forth above, the first cause of action does not mention the purported NDA. In addition, the fourth cause of action alleges that “[a]n actual controversy has arisen between the Plaintiffs, and each of them, on one hand, and the Defendant, on the other hand, with respect to Plaintiffs’ rights to inspect and copy documents and Defendant’s duty to provide them pursuant to the Partnership Agreements.” (Compl., ¶ 95, emphasis added.) Thus, as noted by Park Place, the fourth cause of action cites to the Partnership Agreements as the basis for Plaintiffs’ request for documents.

As further noted by Park Place, Plaintiffs allege in the Complaint that Park Place breached the alleged Partnership Agreements. Plaintiffs allege, inter alia, that “Park Place EB5 breached the Partnership Agreement by failing to provide Plaintiffs, and each of them, with partnership records pursuant to sections 2.24 and 10.04 of the Partnership Agreements.” (Compl., ¶¶ 80, 91.)

Plaintiffs also contend that they are entitled to attorney’s fees with respect to Park Place’s ninth cause of action in the Cross-Complaint for intentional interference with contractual relations. The ninth cause of action alleges that “Cross-Defendants’ conduct made more difficult, or prevented, performance of the Partnership Agreement because they are using the confidential and proprietary material of Park Place to contact the other limited partners of Park Place and to ask them to join in the demand for the withdrawal of their Capital Contributions in violation of Paragraph 4.04 of the Partnership Agreement.” (Cross-Compl., ¶ 103.) The ninth cause of action further alleges that “[a]s a result of Cross-Defendants’ breaches, Park Place has been damaged in an amount no less than $10 million, because, as a result of Cross-Defendants’ demand for the return of their respective Capital Contributions, there is an inability to attract buyers for the Property or to refinance the Property.” (Cross-Compl., ¶ 105.) The Court notes that the ninth cause of action does not mention any purported NDA.

Moreover, even if the first and fourth causes of action of Plaintiffs’ Complaint or the ninth cause of action of the Cross-Complaint was based on the purported NDA, the NDA attached as Exhibit 3 to Plaintiffs’ counsel’s declaration is not signed by Park Place. (Mickadeit Decl., ¶ 5, Ex. 3.) The only signature that appears on Exhibit 3 is below the name Fachuan Bai. (Ibid.)

In the reply, Plaintiffs note that paragraph 89 of the Cross-Complaint alleges that “Cross-Defendants entered into a Confidentiality and Non-Disclosure Agreement Governing the Inspection of Books and Records (‘NDA’) with Park Place in and around April 2019, on July 23, 2019, August 26, 2019.” (Cross-Compl., ¶ 89.) However, regardless of this allegation, Plaintiffs do not provide any evidence of a fully executed NDA in connection with the motion. It is unclear if the NDA referenced in the Cross-Complaint is the same agreement as the purported agreement attached as Exhibit 3 to Plaintiffs’ counsel’s declaration. In any event, as discussed above, the Court does not find that Plaintiffs have demonstrated that the first and fourth causes of action of the Complaint or the ninth cause of action of the Cross-Complaint are cause of action “on” the NDA for purposes of Civil Code section 1717.

Conclusion

            Based on the foregoing, Plaintiffs’ motion is denied.  

Park Place is ordered to provide notice of this ruling.

DATED:  May 25, 2023                                 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court