Judge Teresa A. Beaudet, Case Number: 21STCV41765, Date: 2023-08-24 Tentative Ruling

CALIFORNIA FRANCHISE TAX BOARD, Plaintiff, vs. AMARJIT SAHANI, et al., Defendants.	Case No.:	21STCV41765
	Hearing Date:	August 24, 2023
	Hearing Time:	2:00 p.m.
	[TENTATIVE] ORDER RE: MOTION OF PLAINTIFF CALIFORNIA FRANCHISE TAX BOARD FOR SUMMARY ADJUDICATION

Plaintiff California Franchise Tax Board (“Plaintiff”) filed this action on November 12, 2021 against Defendants Amarjit Sahani (“A. Sahani”), Rajinder Sahani (“R. Sahani”), Gurpreet Sahani (“G. Sahani”), and Shaheen Sahani (“S. Sahani”) (collectively, “Defendants”). The Complaint asserts causes of action for unjust enrichment/restitution, constructive trust, equitable lien, and equitable indemnity.

Plaintiff now moves for summary adjudication in favor of Plaintiff and against Defendants on certain affirmative defenses asserted by Defendants. Defendants oppose.

The Court grants Plaintiff’s request for judicial notice. The Court also grants Defendants’ request for judicial notice.

“[A] motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).) “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in¿Civil Code section 3294, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” (Code Civ. Proc., § 437c, subd. (f)(1).)¿“A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Ibid.)¿

The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the moving party carries this burden, the burden shifts to the opposing party to make a prima facie showing that a triable issue of material fact exists. (Ibid.) 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.)

In the Complaint, Plaintiff alleges that it was a defendant named in complaints in an adversary proceeding within the Chapter 11 bankruptcy case of In re Rajysan, Inc., filed on September 19, 2018 as Case No. 9:17-bk-11363-DS (the “Bankruptcy Case”) in the Bankruptcy Court for the Central District of California. (Compl., ¶ 7.)

The complaints in that adversary proceeding, Adv. No. 9:18-ap-01051-DS (the “Adversary Proceeding”), included the operative “Second Amended Complaint for: Avoidance,

Recovery, and Preservation of Fraudulent Transfers [11 U.S.C. sections 548, 550, and 551; (2) Avoidance, Recovery, and Preservation of Fraudulent Transfers [11 U.S.C. § 544, 550, and 551; Cal. Civ. Code § 3439.04, et seq.]; and (3) Disallowance of Claims held by Defendant [11 U.S.C. § 502(d)]” (the “Committee Complaint”), filed on or about May 21, 2020, on behalf of The Official Committee of Unsecured Creditors (the “Committee”) of the bankruptcy estate of

Rajysan, Inc., dba MMD Equipment, a California Corporation (the “Debtor”). (Compl., ¶ 7.) The Committee Complaint sought, among other relief, to recover from Plaintiff the aggregate amount of $1,041,640.19 (plus interest) on account of multiple alleged fraudulent transfers (collectively, the “Transfers”) from the Debtor to Plaintiff for the benefit of Defendants. (Compl., ¶ 7.)

The gravamen of the Committee Complaint was that Defendants, stockholders and insiders of the Debtor, caused the Debtor to make the Transfers to pay Defendants’ estimated personal income tax obligations to Plaintiff. (Compl., ¶ 8.) The Committee Complaint alleged that the Transfers were actual fraudulent transfers made with the actual intent to hinder, delay, or defraud one or more creditors of the Debtor. (Compl., ¶ 8.) The Committee Complaint also alleged that the Transfers were constructive fraudulent transfers in that, generally speaking, the Debtor allegedly did not receive reasonably equivalent value in exchange for the Transfers and the Transfers were allegedly made at times when the Debtor was insolvent, equitably insolvent, and/or undercapitalized. (Compl., ¶ 8.)

Complaint against Defendants based upon the Transfers, asserting claims for unjust enrichment, constructive trust, equitable lien, and equitable indemnity (the “Third-Party Complaint”). (Compl., ¶ 9.)

On or about April 13, 2021, Plaintiff, the Committee, and the Chapter 11 Trustee of the Debtor’s bankruptcy estate (the “Trustee”) entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) for the purpose of settling the claims asserted by the

Committee against Plaintiff in the Complaint. (Compl., ¶ 10.) On May 6, 2021, the Bankruptcy

Court entered an order approving the Settlement Agreement. (Compl., ¶ 10.) In exchange for the releases provided thereunder and the dismissal of the Committee’s claims against Plaintiff, the Settlement Agreement required Plaintiff to pay $350,000 to the Trustee (the “Settlement Payment”). (Compl., ¶ 11.) On or about June 10, 2021, Plaintiff made the Settlement Payment to the Trustee. (Compl., ¶ 11.)

On August 26, 2021, the Bankruptcy Court entered an order dismissing with prejudice the Committee’s claims against Plaintiff. (Compl., ¶ 13.) On August 27, 2021, the Bankruptcy Court issued its OSC, in which it stated, among other things, that “it appears to the court that there is no basis for the court’s continued jurisdiction over the Third-Party Complaint.” (Compl., ¶ 13.) On September 1, 2021, Plaintiff filed in the Adversary Proceeding a response to the OSC stating that it would not object to the dismissal of the Third-Party Complaint without prejudice to Plaintiff refiling its claims against Defendants in state court and with each party to bear its own fees and costs in the Bankruptcy Court. (Compl., ¶ 14.) On October 18, 2021, the Bankruptcy Court entered an order dismissing the Third-Party Complaint without prejudice. (Compl., ¶ 14.)

Plaintiff alleges that by the Committee Complaint, the Committee sought to recover from Plaintiff certain payments plus interest, that were allegedly made by the Debtor to Plaintiff for the benefit of each of the Defendants, alleging that such payments were fraudulent transfers under the provisions of the Bankruptcy Code. (Compl., ¶¶ 16, 21, 26, 31) Plaintiff refers to such payments as the “A. Sahani Transfers,” the “R. Sahani Transfers,” the “G. Sahani Transfers,” and the “S. Sahani Transfers.” (Ibid.)

As to the first, fifth, ninth, and thirteenth causes of action in the instant case, Plaintiff seeks, inter alia, judgment against A. Sahani in the amount of the “A. Sahani Transfers,” but not to exceed the amount of the Settlement Payment. (Compl., p. 23:23-26.) As to the second, sixth, tenth, and fourteenth causes of action, Plaintiff seeks, inter alia, judgment against R. Sahani in the amount of the R. Sahani Transfers, but not to exceed the amount of the Settlement Payment. (Compl., p. 24:9-12.) As to the third, seventh, eleventh, and fifteenth causes of action, Plaintiff seeks, inter alia, judgment against G. Sahani “[i]n the amount of the G. Sahani Transfers.” (Compl., p. 24:23-25.) As to the fourth, eighth, twelfth, and sixteenth causes of action, Plaintiff seeks, inter alia, judgment against S. Sahani “[i] n the amount of the S. Sahani Transfers.” (Compl., p. 25:7-9.)

As an initial matter, Defendants request in the opposition that the Court “deny or continue the motion due to lack of discovery.” (Opp’n at p. 10:24.) Defendants cite to Code of Civil Procedure section 437c, subdivision (h), which provides that “[i]f it appears from the affidavits submitted in opposition to a motion for summary judgment or summary adjudication, or both, that facts essential to justify opposition may exist but cannot, for reasons stated, be presented, the court shall deny the motion, order a continuance to permit affidavits to be obtained or discovery to be had, or make any other order as may be just. The application to continue the motion to obtain necessary discovery may also be made by ex parte motion at any time on or before the date the opposition response to the motion is due.”

In the reply, Plaintiff notes that on August 1, 2023, Defendants filed an “Ex Parte Application for Stay of Litigation or, in the Alternative, to Continue Trial and all Calendared Dates and Deadlines.” Defendants’ ex parte application argued, inter alia, that “[t]he Sahanis request that, because of the delays in discovery, the FTB’s motion for summary adjudication that is set for August 24, 2023 and the associated dates be continued as well. The current hearing dates do not provide the Sahanis a sufficient opportunity to conduct discovery in a timely manner before deadline for the opposition to the summary adjudication motion and the October 2023 trial date.” (Defendants’ August 1, 2023 Ex Parte Application at p. 2:15-19.) On August 3, 2023, the Court issued an order on Defendants’ ex parte application which provides, inter alia, that “[t]he Franchise Tax Board’s motion for summary adjudication is not continued because no evidence was presented as to the impact of any outstanding discovery on the issues raised in the MSA re affirmative defenses.” (August 3, 2023 Order at p. 2:13-15.) Plaintiff asserts that “[a]lthough made as part of their Opposition to the MSA, Defendants’ request for the same relief now is an improper, unsupported motion for reconsideration under Code of Civil Procedure section 1008.” (Reply at p. 10:24-11:1.)

Plaintiff notes that “Code of Civil Procedure section 1008 governs motions for reconsideration of prior orders. It provides that ‘any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order…The name of a motion is not controlling, and, regardless of the name, a motion asking the trial court to decide the same matter previously ruled on is a motion for reconsideration under Code of Civil Procedure section 1008.” (Myers v. Superior Court (2022) 78 Cal.App.5th 1127, 1135, fn. 4 [internal quotations omitted].) “A motion for reconsideration must be based on new or different facts, circumstances or law, and facts of which the party seeking reconsideration was aware at the time of the original ruling are not new or different. In addition, a party must provide a satisfactory explanation for failing to offer the evidence in the first instance.” (In re Marriage of Herr (2009) 174 Cal.App.4th 1463, 1468 [internal quotations and citations omitted].) Defendants’ second request in the opposition that the Court continue the hearing or deny the motion due to lack of discovery does not indicate that the request is based on new or different facts, circumstances, or law, or facts that Defendants were not aware of at the time of the original ruling on Defendants’ ex parte application.

Based on the foregoing, the Court denies Defendants’ request to continue the hearing on Plaintiff’s motion or deny the motion due to the asserted lack of discovery.

On February 4, 2022, Defendants filed a “General Denial” in this action alleging that Defendants “generally denies each and every allegation of plaintiff’s complaint.” Defendants’ General Denial also attaches a number of affirmative defenses.

Defendants’ fourteenth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred by the doctrine of preclusion.” (Defendants’ Affirmative Defenses, p. 2.) Defendants’ seventeenth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred by the doctrine of res judicata.” (Id. at p. 3.)

Defendants’ eighteenth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred by the doctrine of collateral estoppel.” (Defendants’ Affirmative Defenses, p. 3.) Defendants’ nineteenth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred by the doctrine of merger.” (Ibid.) Defendants’ twentieth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred by the doctrine of bar.” (Ibid.)

Plaintiff asserts that the foregoing defenses “are all variations on the same theme and

subsumed within the overarching doctrine of preclusion called res judicata.” (Mot. at p. 12:10-12) Plaintiff notes that “in California res judicata is said to have two aspects, its primary aspect of bar and merger and the secondary aspect of collateral estoppel.” (Aerojet-General Corp. v. Am. Excess Ins. Co. (2002) 97 Cal.App.4th 387, 401 [internal quotations omitted].) “Claim preclusion, the primary aspect of res judicata, acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties. Issue preclusion, the secondary aspect historically called collateral estoppel, describes the bar on relitigating issues that were argued and decided in the first suit.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 [internal quotations and citation omitted].)

“Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit. If claim preclusion is established, it operates to bar relitigation of the claim altogether.” (DKN Holdings LLC v. Faerber, supra, 61 Cal.4th at p. 824 [internal citations omitted].) “Issue preclusion differs from claim preclusion in two ways. First, issue preclusion does not bar entire causes of action. Instead, it prevents relitigation of previously decided issues. Second, unlike claim preclusion, issue preclusion can be raised by one who was not a party or privy in the first suit. Only the party against whom the doctrine is invoked must be bound by the prior proceeding…In summary, issue preclusion applies (1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.” (Id. at pp. 824-825 [internal quotations, citations, and emphasis omitted].)

Plaintiff indicates that Defendants served responses to Plaintiff’s First Set of Form Interrogatories in this action. (Keith Decl., ¶ 2, Exs. A-D.) Form Interrogatory No. 15.1(a) provides, “[i]dentify each denial of a material allegation and each special or affirmative defense in your pleadings and for each: (a) state all facts upon which you base the denial or special or affirmative defense.” (Ibid.) Defendants’ responses each contain the following “General Denial” in response to Form Interrogatory No. 15.1(a):

“(a) Responding Party denies the allegations in the Complaint. The denials are based on

Responding Party committed no wrongdoing. Any wrongdoing is the result of non-parties

Gurmeet Sahani and Jasmine Sahani. Gurmeet (because many of the involved individuals have the same last name, to avoid confusion, they will be referred to herein by their first names) is Rajinder and Amarjit’s son; Gurpreet’s older brother; and Shaheen’s brother-in-law by marriage to Gurpreet. Jasmine is Gurmeet’s spouse. Following a 16 court-day bench trial in the Los Angeles Superior Court, on March 28, 2019, the Hon. Mary Ann Murphy issued a 155 page Statement of Decision. RJN #2 (Statement of Decision). Therein, she made binding findings that are highly relevant to the instant matter. Among the many significant findings, Judge Murphy concluded that this bankruptcy case is the direct result of Gurmeet and Jasmine, stating:

That Gurmeet and Jasmine’s conduct led to Debtor’s bankruptcy is relevant for the instant motion and, in fact, the entire case against Defendants; it is not subject to dispute or argument – it is the result of a trial where Judge Murphy made findings that have collateral estoppel effect here. Among the findings are: ‘Gurmeet Sahani and Jasmine Sahani embarked on a course that drove Rajysan into Chapter 11 Bankruptcy….’ RJN #2 p143. ‘Rajysan is in Chapter 11 proceedings as a result of the conduct that is the basis for the punitive damage award [against Gurmeet and Jasmine’]. RJN #2 p135.

1. Gurmeet and Jasmine breached their fiduciary duties to Debtor and Defendants more than 25 times.

2. Gurmeet and Jasmine’s wrongful conduct was intentional and involved concealment in the form of trickery against, and deceit of, Defendants.

3. Gurmeet instructed the family and business accountant, Bruce Miller, to use whatever figures Gurmeet provided.

5. Gurmeet and Jasmine failed to disclose and actively hid their wrongful conduct.

6. Gurmeet and Jasmine engaged in transactions that benefitted themselves at Debtor’s expense.

The Court found that Gurmeet ‘had major credibility issues, was repeatedly impeached

and at times, seemed not even to try to answer questions in a credible manner. Gurmeet Sahani was not a credible witness and was not worthy of belief. issues’. Similarly, Jasmine was not a credible witness, and ‘bears a great deal of the responsibility for the lax accounting’ at Debtor. By contrast, the instant Defendants were found to be credible witnesses.

In the Court’s Statement of Decision, Gurmeet was found to have been responsible for the Defendants’ tax returns even though he knew that the tax returns did not necessarily reflect the truth and were not reliable; ‘he would simply advise the family [Defendants herein] that the taxes have been paid.’ These, and the other, findings set forth in the Statement of Decision establish that Responding Party did not knowingly, intentionally, or negligently participate in or contribute to a constructive or actual fraudulent transfer.

Moreover, the money that Rajysan paid to the Plaintiff was the result of Responding

Party’s promissory notes in the company’s favor. Responding Party has always, and continues to believe, that the promissory notes are legitimate contractual obligations that, upon maturity, will require Responding Party to pay the balance due. The promissory notes are the documents that establish the amount that Responding Party received, notwithstanding any amounts that Plaintiff claims is due. Moreover, any amount that Plaintiff claims is due from Responding Party would be limited to Responding Party’s share of the amounts Responding Party paid to the Committee for settlement.

The Propounding Party settled with the Committee when there was no liability owed. The

claim brought by the Committee against the Propounding Party was based on the allegation that the Propounding Party received a fraudulent transfer from Rajysan because Rajysan made payments on the Responding Party’s behalf. However, those payments were not fraudulent transfers. As set forth above, the Responding Party has no liability because the alleged transfers were the result of enforceable promissory notes for the same amount as Rajysan paid to the Propounding Party. The promissory notes, therefore were entered into in good faith and for reasonable value and cannot be fraudulent transfers. If the promissory notes are enforceable, then the Responding Party was not the beneficiary of a fraudulent transfer to the Propounding Party, and the Propounding Party had no liability.

Additionally, the claims that the Propounding Party asserts in this lawsuit seek monetary

damages that the Committee is also seeking in the litigation pending in the United States

Bankruptcy Court case of The Official Committee of Unsecured Creditors of the bankruptcy estate of Rajysan, Inc., etc. v. Gurpreet Sahani, et al. [Case No. 9:18-ap-01040-DS]. Any recovery here or in the Bankruptcy Court case will result in the Responding Party being required to pay the same damages twice. damages in this case that are damages for which the Committee seeks.”

Plaintiff also indicates that the Defendants’ responses to Plaintiff’s Form Interrogatory No. 15.1(a) as to the fourteenth and seventeenth through twentieth affirmative defenses state, “[s]ee response above related to the general denials.” (Keith Decl., ¶ 2, Exs. A-D, pp. 9:7; 9:19; 9:23; 9:27; 10:4.)

As set forth above, Defendants’ responses to Form Interrogatory No. 15.1(a) reference litigation involving Gurmeet Sahani and Jasmine Sahani, in which the Hon. Mary Ann Murphy issued a 155 page Statement of Decision on March 28, 2019 (herein, the “Sahani Litigation”). (Keith Decl., ¶ 2, Exs. A-D, p. 3:24-28.) In the instant motion, Plaintiff asserts that “nothing in that Statement of Decision has any preclusive effect whatsoever on [Plaintiff]. [Plaintiff] was not a party to the Sahani Litigation...” (Mot. at p. 12:28-13:2.) Exhibit “D” to Plaintiff’s request for judicial notice is the “Docket for Los Angeles Superior Court Case No. PC055253.” (Plaintiff’s RJN, Ex. D.) Case No. PC055253 concerns the matter Rajysan Inc. v. Gurmeet Sahani et al. (Ibid.) Plaintiff indicates that it is not listed as a party in this action. (Ibid.)

Plaintiff also asserts that it was not in privity with Gurmeet Sahani or Jasmine Sahani. “As applied to questions of preclusion, privity requires the sharing of an identity or community of interest, with adequate representation of that interest in the first suit, and circumstances such that the nonparty should reasonably have expected to be bound by the first suit. A nonparty alleged to be in privity must have an interest so similar to the party’s interest that the party acted as the nonparty’s virtual representative in the first action.” (DKN Holdings LLC v. Faerber, supra, 61 Cal.4th at p. 826 [internal quotations omitted].) Plaintiff’s Undisputed Material Fact No. 20 states that “[w]ith respect to the Sahani Litigation, FTB was not in privity with Gurmeet and/or Jasmine Sahani.” In support of this statement, Plaintiff cites to Defendants’ “General Denial” in their responses to Form Interrogatory No. 15.1(a), which is set forth above. (Keith Decl., ¶ 2, Exs. A-D, pp. 3:18-6:8.)

In the opposition, Defendants do not appear to dispute that Plaintiff was not a party to the Sahani Litigation, or that Plaintiff was not in privity with Gurmeet Sahani or Jasmine Sahani. The opposition does not respond to Plaintiff’s arguments on this point. As set forth above, “[c]laim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” (DKN Holdings LLC v. Faerber, supra, 61 Cal.4th at p. 824, emphasis added.) “[I]ssue preclusion applies (1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.” (Id. at p. 825, emphasis added.)

Based on the foregoing, the Court finds that Plaintiff has met its burden of demonstrating that Defendants’ fourteenth, seventeenth, eighteenth, nineteenth, and twentieth affirmative defenses are without merit, and that Defendants have failed to raise a triable issue of material fact thereto.

D. Defendants’ Third, Fourth, Twenty-Fifth, and Thirtieth Through Thirty-Second Affirmative Defenses

Defendants’ third affirmative defense alleges that “[a]s an affirmative defense to each

and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought is barred by the doctrine of estoppel.” (Defendants’ Affirmative Defenses, p. 1.) Defendants’ fourth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought is barred by the doctrine of waiver.” (Ibid.)

Defendants’ twenty-fifth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred in whole or part on the ground that Plaintiff consented to the payment without recourse to Defendants.” (Defendants’ Affirmative Defenses, p. 4.) Defendants’ thirtieth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred in whole or part on the ground that Plaintiff’s conduct is the supervening cause of its damages.” (Id. at p. 5.)

Defendants’ thirty-first affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred in whole or part on the ground that Plaintiff’s recovery is moot by its admission of no liability for the underlying payment.” (Defendants’ Affirmative Defenses, p. 5.) Defendants’ thirty-second affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred in whole or part on the ground that Plaintiff’s conduct caused its alleged damages.” (Ibid.)

Plaintiff asserts that the foregoing affirmative defenses are in contravention of the rule that “[a]ffirmative defenses must not be pled as terse legal conclusions, but rather … as facts averred as carefully and with as much detail as the facts which constitute the cause of action and are alleged in the complaint.” (Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 812-813 [internal quotations omitted].) But the Court does not find that this is the appropriate standard on the instant motion. Rather, it appears to be an argument applicable to a demurrer to Defendants’ “General Denial.” Here, pursuant to Code of Civil Procedure section 437c, subdivision (f)(1), “[a] party may move for summary adjudication as to…one or more affirmative defenses…if the party contends…that there is no merit to an affirmative defense as to any cause of action…” As discussed, the moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.)

Plaintiff also asserts that “in their Form Interrogatory 15.1 Response, in which Defendants were required to state all facts on which they based their Affirmative Defenses, Defendants do not: (A) explain, much less do so meaningfully, why [Plaintiff] waived its right to pursue its claims herein or should be estopped from doing so; (B) even use the word ‘waive’ or any variation thereof, or use the word ‘estoppel’ except in the context of collateral estoppel (a defense addressed in the preceding section); (C) explain what conduct of [Plaintiff’s] is alleged to have caused its damages, or how; or (D) specify which payment [Plaintiff] allegedly consented to without recourse to Defendants.” (Mot. at p. 14:4-10; Keith Decl., ¶ 2, Exs. A-D, pp. 3:18-6:8; 7:16; 7:20; 10:24; 11:19; 11:23; 11:27.)

In the opposition, Defendants assert that Plaintiff’s “second foundational issue is that [Defendants’] discovery responses, served in April 2022, are insufficiently detailed. [Defendants] dispute this fact…If [Plaintiff] was dissatisfied with the answers or the objections, it had 45 days to exercise its statutory right to bring whatever discovery motions it believed were necessary.” (Opp’n at p. 5:19-24.) Defendants also assert that “[Plaintiff] has the burden of establishing that [Defendants] cannot meet one or more of the elements of each affirmative defense. Once again, [Plaintiff] has not met its burden of proof because it has not addressed the elements. [Plaintiff’s] sole argument is that it was entitled to settle without admitting liability. This argument does not support summary adjudication.” (Opp’n at p. 7:27-8:3.)

Plaintiff asserts that “deficient interrogatory responses satisfy a movant’s initial burden and shift the burden to its opponent to set forth specific facts showing a triable issue.” (Reply at p. 2:23-24.) In the reply, Plaintiff cites to Andrews v. Foster Wheeler LLC (2006) 138 Cal.App.4th 96, 105-106, where the Court of Appeal found that “[p]laintiffs contend we should not draw an inference of completeness from Foster Wheeler’s discovery. They contend Foster Wheeler inaccurately portrayed their discovery responses, and fault Foster Wheeler for failing to refer to the elements of plaintiffs’ claim addressed by Foster Wheeler’s special interrogatories, or to the specific interrogatory answers that showed a lack of evidence. We find no merit in this contention. As we have discussed herein, plaintiffs’ discovery responses were devoid of material facts showing that Andrews had been exposed to a Foster Wheeler product. Foster Wheeler was correct to cite to these interrogatory answers in support of its motion, as they are prima facie evidence that plaintiffs ‘[do] not possess, and cannot reasonably obtain, needed evidence’ to support their claim.” (Citing Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 854.)[1] The Andrews Court further noted that “[i]f plaintiffs respond to comprehensive interrogatories seeking all known facts with boilerplate answers that restate their allegations, or simply provide laundry lists of people and/or documents, the burden of production will almost certainly be shifted to them once defendants move for summary judgment and properly present plaintiffs’ factually devoid discovery responses.” (Id. at p. 107.)

Plaintiff also notes in the motion Defendants’ responses to Form Interrogatory No. 15.1(a) state, inter alia, that “[t]he Propounding Party settled with the Committee when there was no liability owed.” (Keith Decl., ¶ 2, Exs. A-D, pp. 5:21.) In addition, Plaintiff indicates that the subject “Settlement Agreement and Mutual Release” that Plaintiff is a party to states in a section titled “No Admission of Liability” that “[n]othing contained herein shall be deemed to be an admission of liability or wrongdoing by any Party hereto.” (Plaintiff’s RJN, Ex. C, Settlement Agreement, § 16.) Plaintiff asserts that the third, fourth, twenty-fifth and thirtieth through thirty-second affirmative defenses fail to the extent they rest on such facts. More specifically, Plaintiff asserts that “[t]o pursue indemnity from Defendants, [Plaintiff] was not required to admit liability or to suffer and pay a judgment in the Bankruptcy Court. Rather, [Plaintiff] was entitled to settle with the Estate and then pursue Defendants to recover the Settlement Payment.” (Mot. at p. 14:18-21.) Defendants cite to Teachers Insurance Co. v. Smith (1982) 128 Cal.App.3d 862, 865, where the Court of Appeal noted that “[i]t is likewise established that suit for partial indemnity can be brought against a concurrent tortfeasor not named by the tort plaintiff in the original complaint; that a claim for partial indemnity is independent and can be brought in a separate suit after settlement or after satisfaction of judgment in the underlying suit; and that there need not be a judgment against a settling tortfeasor seeking indemnity.” (Internal citations omitted.)

In the opposition, Defendants reference Exhibit 5 to their Request for Judicial Notice, a Joint Status Report filed in Case No. 9:17-bk-11363-DS, the “Bankruptcy Case” discussed in the Complaint in the instant action. (Compl., ¶ 7.) The Joint Status Report provides, inter alia, that “[t]his JSR deals only with FTB’s Third Party Complaint (‘TPC’), which alleges equitable indemnity and related claims against certain ‘insiders’ of the Debtor (for convenience, the ‘Insiders’). The gist of the TPC is that, if FTB is held liable on the Committee’s claims, then FTB should be able to recover from the Insiders since the Committee alleges the Insiders used corporate funds to pay personal tax liabilities to FTB. As discussed at the 6/12/19 Status Conference, the TPC could be mooted (i.e., if the Insiders and/or FTB successfully defend against the Committee’s claims) and so adjudication of the TPC should trail that of the rest of this adversary proceeding.” (Defendants’ RJN, Ex. 5, p. 4.)

Defendants assert that “[Plaintiff] proposed that its litigation against the Sahanis await the conclusion of the Estate’s litigation against the Sahanis. It chose to settle the case even though it knew the claims may be mooted, and then it filed this action even though it took the position in Federal Court that its dispute with the Sahanis should proceed after the Sahani Litigation concludes.” (Opp’n at p. 8:8-12.) Defendants contend that “[Plaintiff] caused its own damage – it could and should have allowed the Sahanis’ defense to move forward. By failing to have a finding or even state that the settlement was due to the Sahanis’ conduct, there is a triable issue of fact about [Plaintiff’s] right to recover, implicating the affirmative defenses at issue here.” (Opp’n at p. 8:17-20.)

In light of the foregoing the Court finds that Defendants have raised a triable issue of material fact as to the third, fourth, twenty-fifth, and thirtieth through thirty-second affirmative defenses.

Defendants’ ninth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the claims for relief in the COMPLAINT are subject to setoff.” (Defendants’ Affirmative Defenses, p. 2.) Defendants’ tenth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the claims for relief in the COMPLAINT are barred by Plaintiff’s impairment of subrogation rights.” (Ibid.)

Defendants’ eleventh affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the claims for relief in the COMPLAINT are barred by Plaintiff’s impairment of contribution rights.” (Defendants’ Affirmative Defenses, p. 2.) Defendants’ twenty-third affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred by Plaintiff’s failure to act in good faith and fairly with Defendants.” (Id. at p. 4.)

Plaintiff asserts that “[i]n their Form Interrogatory 15.1 Response, Defendants do not: (A) identify any amounts alleged to be due from [Plaintiff] that would need to be set off against a recovery by [Plaintiff] herein; (B) explain what their asserted subrogation or contribution rights are or how [Plaintiff] has impaired them; or (C) explain how [Plaintiff] has failed to act in good faith and fairly with Defendants.” (Mot. at p. 15:15-18; Keith Decl., ¶ 2, Exs. A-D, pp. 3:18-6:8; 8:15; 8:19; 8:23; 10:16.)

Plaintiff also notes that as set forth above, Defendants’ responses to Form Interrogatory No. 15.1(a) state, inter alia, that “the claims that the Propounding Party asserts in this lawsuit seek monetary damages that the Committee is also seeking,” and that “[a]ny recovery here or in the Bankruptcy Court case will result in the Responding Party being required to pay the same damages twice.” (Keith Decl., ¶ 2, Exs. A-D, p. 6:3-4; 6:6-8.)

Plaintiff asserts that the ninth, tenth, eleventh, and twenty-third affirmative defenses fail because there is no risk of Defendants being required to pay the same damages twice. Plaintiff cites to 11 U.S.C. section 550, subdivision (a), which provides that “[e]xcept as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title [11 USCS § 544, 545, 547, 548, 549, 553(b), or 724(a)], the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee.” 11 U.S.C. section 550, subdivision (d) provides that “[t]he trustee is entitled to only a single satisfaction under subsection (a) of this section.”

Plaintiff asserts that its “settlement payment reduced Defendants’ potential liability to the Estate by the amount of the settlement payment.” (Mot. at p. 16:2-3.) Plaintiff asserts that “[t]he recovery [Plaintiff] seeks from each Defendant herein is either less than the amount of the settlement payment (because the aggregate Transfers to that Defendant amounted to less than the settlement payment) or is expressly limited in the Complaint to the amount of the settlement payment…Therefore, [Plaintiff’s] claims do not expose Defendants to any risk of double liability.” (Mot. at p. 16:3-7.)

In the opposition, Defendants indicate that Plaintiff does not offer evidence that the

Estate will reduce its claim against Defendants. Defendants’ counsel also states that “[i]n March 2023, the plaintiff in the Bankruptcy Court case against [Defendants], with Sandra McBeth as the Chapter 7 Trustee (‘Trustee’) as the plaintiff, propounded requests for admission on [Defendants] seeking admissions that they received the transfers to the FTB. Specifically, Requests 192, 193, 195, and 196 seek [Defendants’] admissions that transfers occurred, including transfers to the FTB.” (Hyam Decl., ¶ 15.) Defendants’ counsel also states that “[o]n January 31, 2023, the Trustee produced additional documents. The documents included a list of payments from Rajysan to the FTB. The Trustee’s discovery responses did not reflect that the $350,000 the FTB paid will be credited to the benefit of [Defendants].” (Hyam Decl., ¶ 16.)

Based on the foregoing the Court finds that Plaintiff has raised a triable issue of material fact as to the ninth, tenth, eleventh, and twenty-third affirmative defenses.

Lastly, Defendants’ twenty-eighth affirmative defense alleges that “[a]s an affirmative defense to each and every claim for relief set forth in the COMPLAINT, Defendants allege that the relief sought in the COMPLAINT is barred in whole or part on the grounds of failure to join and [sic] indispensable party.” (Defendants’ Affirmative Defenses, p. 4.) Plaintiff notes that Code of Civil Procedure section 389, subdivision (a) provides as follows:

“A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party.”

Plaintiff asserts that “Defendants do not explain, either in their Answer or in their Form Interrogatory 15.1 Response, which absent party [Plaintiff] was supposed to join or why that party is indispensable to this action…[Plaintiff] can only assume Defendants were referring to Gurmeet and/or Jasmine Sahani, or else some representative of the Estate. Either way, the defense fails.” (Mot. at p. 16:21-26.) Plaintiff asserts that “[a]s for Gurmeet and Jasmine, a principal thrust of Defendants’ Form Interrogatory 15.1 Response is that they were responsible for Rajysan’s bankruptcy and for causing Rajysan to make the tax payments that the Estate later claimed were fraudulent…Perhaps Defendants’ position is that, because Defendants contend Gurmeet and Jasmine are responsible, Defendants might have some claim against them if [Plaintiff] prevails, such that, allegedly, ‘in [their] absence complete relief cannot be accorded among those already parties’ (Code Civ. Proc., § 389, subd. (a).) However, Defendants have not sought to join Gurmeet or Jasmine as parties to this action.” (Mot. at p. 16:27-17:6.)

Exhibit F to Plaintiff’s RJN is the docket for this action, which does not show that Defendants have sought to add any parties to this action. (Plaintiff’s RJN, Ex. F.) In the opposition, Defendants do not address Plaintiff’s arguments concerning the twenty-eighth affirmative defense. Defendants do not dispute that this affirmative defense does not have merit.[2]

Based on the foregoing, the Court finds that Plaintiff has met its burden of demonstrating that Defendants’ twenty-eighth affirmative defense is without merit, and that Defendants have failed to raise a triable issue of material fact thereto.

Based on the foregoing, Plaintiff’s motion for summary adjudication is granted in part and denied in part.

The Court grants Plaintiff’s motion as to the fourteenth, seventeenth, eighteenth, nineteenth, twentieth, and twenty-eighth affirmative defenses. The Court denies the motion as to the third, fourth, ninth, tenth, eleventh, twenty-third, twenty-fifth, thirtieth, thirty-first, and thirty-second affirmative defenses.

[1]In Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at page 854, the California Supreme Court noted that “[s]ummary judgment law in this state, however, continues to require a defendant moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.”

[2]In the reply, Plaintiff cites to Wisner v. Dignity Health (2022) 85 Cal.App.5th 35, 45, where the Court of Appeal noted that “Wisner fails to respond to SJMC’s forfeiture argument in his reply brief on appeal, tacitly conceding its merit.”

Superior Court of California

County of Los Angeles

Department 50