Judge: Teresa A. Beaudet, Case: 22STCV24073, Date: 2024-05-09 Tentative Ruling

Case Number: 22STCV24073    Hearing Date: May 9, 2024    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

On July 26, 2022, Plaintiffs London Holmes dba London on da Track and London Productions Enterprise, LLC (“LPE”) (jointly, “Plaintiffs”) filed this action against Defendants SMA Advisors LLC and Sulaiman Muhammad. The Complaint alleges causes of action for (1) breach of contract and (2) professional negligence.

SM Advisors LLC and Sulaiman Muhammad (jointly, “Defendants”) now move for an order granting summary judgment in their favor and against Plaintiffs on Plaintiffs’ Complaint. In the alternative, Defendants seek an order summarily adjudicating certain issues in their favor. The motion is unopposed.

Request for Judicial Notice

The Court grants Defendants’ request for judicial notice.

Legal Standard

“[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 Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” ((Id., § 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.) When a defendant seeks summary judgment or summary adjudication, he/she must show either (1) that one or more elements of the cause of action cannot be established; or (2) that there is a complete defense to that cause of action. ((Code Civ. Proc., § 437c, subd. (p)(2).)

Discussion

A.    Allegations of the Complaint

In the Complaint, Plaintiffs allege that “Plaintiff Holmes is a songwriter, rapper, and record producer.” (Compl., ¶ 10.) Plaintiffs allege that “[i]n or about 2019, Plaintiffs entered into an oral agreement…with Defendants, and each of them, whereby Defendants were to act as Plaintiffs’ business managers, in exchange for certain fees. Defendants remained Plaintiffs’ business managers until approximately 2021.” (Compl., ¶ 11.)

Plaintiffs allege that “[w]hen Defendants became Plaintiffs’ business managers, Defendants, and each of them, were aware that no tax returns had been filed on Plaintiff’s behalf during the years 2013-2018.” (Compl., ¶ 12.) Plaintiffs allege that “[n]evertheless, Defendants failed to take any action either to file the tax returns or to address the situation with the Internal Revenue Service or the Franchise Tax Board.” (Compl., ¶ 13.) Plaintiffs allege that “when Defendants did file a (state) tax return on behalf of Plaintiff, they filed it in Arizona, notwithstanding that Plaintiff is a resident of the State of California.” (Compl., ¶ 14.)

Plaintiffs allege that “[o]n or about April 8, 2021, while Defendants acted as Plaintiffs’ business managers, they applied for, and ultimately secured, a Payroll Protection Program (‘PPP’) loan from the Small Business Association (‘SBA’) on behalf of LPE, in the amount of $208,333.00.” (Compl., ¶ 15.) Plaintiffs allege that “[r]ather than using the proceeds from Plaintiffs’ PPP loan to pay employees, Defendants paid independent contractors. As a result, LPE became ineligible for loan forgiveness.” (Compl., ¶ 17.) Plaintiffs allege that “Defendants…have materially breached the aforementioned Agreement by, among other things, failing to comply with the requirements of the U.S. Government in order to obtain PPP loan forgiveness.” (Compl., ¶ 19.)

B.    First Cause of Action for Breach of Contract

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” ((Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

Defendants argue that Plaintiffs “cannot prove an essential element of their contract claim – i.e., the existence of a contract.” (Mot. at p. 7:12-13.) More specifically, Defendants assert that they are “entitled to summary adjudication in their favor on Plaintiffs’ First Cause of Action for breach of oral contract because Plaintiffs’ allegations of an alleged oral agreement are precluded by a written, integrated agreement between the parties, effective October 9, 2019.” (Notice of Mot. at p. 2:11-14.)

As set forth above, Plaintiffs allege in the first cause of action that “[i]n or about 2019, Plaintiffs entered into an oral agreement (hereinafter the ‘Agreement’) with Defendants, and each of them, whereby Defendants were to act as Plaintiffs’ business managers, in exchange for certain fees.” (Compl., ¶ 11, emphasis added.) Plaintiffs allege that “Defendants, and each of them, have materially breached the aforementioned Agreement by, among other things, failing to comply with the requirements of the U.S. Government in order to obtain PPP loan forgiveness.” (Compl., ¶ 19.)

Defendants submit the Declaration of Sulaiman Muhammad, the owner of SM Advisors, LLC (“SM Advisors”). (Muhammad Decl., ¶ 1.) Mr. Muhammad states that “[o]n or about October 9, 2019, Holmes and SM Advisors entered into a written Engagement Letter (‘Engagement Agreement’), pursuant to which SM Advisors provided exclusive business management services to Holmes and his business entities. This includes, without limitation, London Productions Enterprise, LLC (‘LPE’), formed in or about 2014, of which Holmes is the owner and CEO.” (Muhammad Decl., ¶ 4.)

Mr. Muhammad’s declaration provides that “[a] true and correct copy of the Engagement Agreement is attached hereto as Exhibit C. The term of the Engagement Agreement was extended by the parties for an additional term, through and including the summer of 2021, when Holmes transferred his and LPE’s business to a new business manager.” (Muhammad Decl., ¶ 4.)

Defendants note that paragraph 10(a) of the Engagement Agreement provides as follows:

“(a) This engagement sets forth the entire agreement between me [sic] with respect to the subject matter hereof and no modification, amendment, waiver, termination or discharge of any provision hereof shall be binding upon the parties unless confirmed by a written instrument executed by the parties. No waiver by either you, or me of any term or provision hereof shall be binding upon the parties unless confirmed by a written instrument executed by the parties. No waiver by either you, or me of any term or provision of this engagement or of any default hereunder shall affect you or my rights hereafter to enforce such term or provision, or to exercise any right or remedy in the event of any other default, whether or not similar. This Engagement Letter shall not become effective until accepted and executed by you. The parties hereby represent and warrant that no statement, promise or representation, or inducement, except as herein set forth, has been made on any party’s behalf, or by any of such party’s employees or representatives. Should any provision of this engagement be void or unenforceable, such provision shall be deemed severed and this Engagement Letter with such provision severed shall remain in full force and effect to the extent permitted by law; provided, however, that in the event such severance shall materially affect your right to receive compensation under this Engagement Letter, you shall have the right to elect to treat your obligations under this Engagement Letter as terminated. This Engagement Letter shall inure to the benefit of the parties hereto and to their respective successors, assigns and heirs.” (Muhammad Decl., ¶ 4, Ex. C, ¶ 10(a).)

Defendants assert that “the engagement letter between Plaintiffs and SM Advisors[1] was the final expression of their agreement.” (Mot. at p. 12:14-15.)

Defendants cite to Code of Civil Procedure section 1856, subdivision (a), which provides that “[t]erms set forth in a writing intended by the parties as a final expression of their agreement with respect to the terms included therein may not be contradicted by evidence of a prior agreement or of a contemporaneous oral agreement.” Defendants also cite to Masterson v. Sine (1968) 68 Cal.2d 222, 225, where the California Supreme Court noted that “[w]hen the parties to a written contract have agreed to it as an ‘integration’ -- a complete and final embodiment of the terms of an agreement -- parol evidence cannot be used to add to or vary its terms.” The Masterson Court noted that “[t]he crucial issue in determining whether there has been an integration is whether the parties intended their writing to serve as the exclusive embodiment of their agreement…The instrument itself may help to resolve that issue. It may state, for example, that ‘there are no previous understandings or agreements not contained in the writing,’ and thus express the parties’ ‘intention to nullify antecedent understandings or agreements.’” ((Id. at pp. 225-226.)

Defendants emphasize that the Engagement Agreement provides, as set forth above, that “[t]his engagement sets forth the entire agreement between me [sic] with respect to the subject matter hereof and no modification, amendment, waiver, termination or discharge of any provision hereof shall be binding upon the parties unless confirmed by a written instrument executed by the parties,” and that “[t]he parties hereby represent and warrant that no statement, promise or representation, or inducement, except as herein set forth, has been made on any party’s behalf, or by any of such party’s employees or representatives.” (Muhammad Decl., ¶ 4, Ex. C, ¶ 10(a).) Defendants assert that “[i]n short, when Plaintiffs signed the Engagement Letter, they agreed specifically that there were no representations, promises or agreements that were not set forth in the Agreement. Based upon this integration clause…the Engagement Letter is a fully integrated contract, and any evidence of a purported oral business management agreement between the parties must be excluded pursuant to the parol evidence rule.” (Mot. at p. 13:9-14.)

As set forth above, the instant motion is unopposed. Thus, Plaintiffs do not dispute that they are “precluded from introducing evidence of the purported oral contract with SM Advisors, and thus cannot prove an essential element of their contract claim – i.e., the existence of a contract.” (Mot. at p. 7:11-13.)

Based on the foregoing, the Court finds that Defendants have met their burden of demonstrating that the first cause of action of the Complaint is without merit, and that Plaintiffs have failed to raise a triable issue of material fact as to this cause of action.

C.    Second Cause of Action for Professional Negligence

Defendants also assert that “there are no triable issues of material fact as to Plaintiffs’ professional negligence claim.” (Mot. at p. 14:17-18.) The Court notes that “[t]o state a cause of action for professional negligence, a party must show (1) the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence.” ((Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137 [internal quotations omitted].)

Defendants first assert that “SM Advisors is not liable for Plaintiff’s unfiled tax returns.” (Mot. at p. 14:19, emphasis omitted.) As set forth above, the Complaint alleges that “[w]hen Defendants became Plaintiffs’ business managers, Defendants…were aware that no tax returns had been filed on Plaintiff’s behalf during the years 2013-2018…Nevertheless, Defendants failed to take any action either to file the tax returns or to address the situation with the Internal Revenue Service or the Franchise Tax Board.” (Compl., ¶¶ 12-13.)[2]

In the motion, Defendants assert that “[i]t is undisputed that SM Advisors was not Plaintiffs’ business manager prior to 2019…It follows that SM Advisors had no duty – contractual or otherwise – to file tax returns for Plaintiffs prior to 2019 (e.g., 2013-2018).” (Mot. at p. 14:21-24, emphasis omitted.) As set forth above, Mr. Muhammad states in his supporting declaration that “[o]n or about October 9, 2019, Holmes and SM Advisors entered into a written Engagement Letter…pursuant to which SM Advisors provided exclusive business management services to Holmes and his business entities.” (Muhammad Decl., ¶ 4, emphasis added.) Defendants also point to Sulaiman Muhammad’s Special Interrogatory No. 8 to London Holmes, which states, “IDENTIFY all your business managers between the years 2013 and 2019.” (Kossoff Decl., ¶ 2, Ex. A.) The response to Special Interrogatory No. 8 includes objections and states, “Plaintiffs had no business managers prior to retaining Defendants.” (Ibid.) Plaintiffs do not oppose the instant motion, and accordingly do not dispute Defendants assertion that Defendants “had no duty…to file tax returns for Plaintiffs prior to 2019 (e.g., 2013-2018).” (Mot. at p. 14:23-24, emphasis omitted.)

            In addition, Mr. Muhammad states in his supporting declaration that “[s]hortly after the Engagement Agreement was executed, I contacted Holmes’ bookkeeper/attorney, Alex Hartnett, concerning Holmes’ financial history, including taxes. Mr. Hartnett represented that LPE did not have any past income as Holmes’ income was paid to a third-party entity, and thus no tax returns needed to be filed for LPE for years 2013-2018. I also obtained power of attorney for Holmes and his entities and, in that capacity, contacted the IRS regarding any outstanding tax liability for Holmes and LPE. I was informed that no outstanding tax liability existed.” (Muhammad Decl., ¶ 5.) Plaintiffs do not oppose the instant motion and thus do not address this evidence.

            Next, Defendants assert that “SM Advisors is not liable for Plaintiffs’ filed tax returns.” (Mot. at p. 15:3, emphasis omitted.) As discussed, Plaintiffs allege in the Complaint that “when Defendants did file a (state) tax return on behalf of Plaintiff, they filed it in Arizona, notwithstanding that Plaintiff is a resident of the State of California.” (Compl., ¶ 14.)

            In the instant motion, Defendants assert that “Plaintiffs’ contention that Holmes was not an Arizona resident in 2019 (and therefore SM Advisors was negligent in filing his taxes there) is incorrect. Plaintiffs’ own records for the relevant tax year show Holmes as residing at a Scottsdale, Arizona address, along with his mother.” (Mot. at p. 15:4-7, emphasis omitted.) In his supporting declaration, Mr. Muhammad states that “[i]n performing professional services for Holmes, I communicated frequently with his mother, Cheryl Mack. Ms. Mack is the President and owner of Mack Management LLC, and a resident of Arizona. I understood that Holmes resided with his mother in Arizona in 2019. Thus, for tax year 2019, SM Advisors filed a tax return for Holmes in Arizona. This was consistent with documents I received from Holmes after SM Advisors was retained, including a binder for State Farm automobile insurance for a 2019 Lamborghini, which listed the applicants as Cheryl Mack and London Holmes living at 10965 E. Southwind Ln., Scottsdale, Arizona 85262-3618.” (Muhammad Decl., ¶ 6, Ex. D.) Plaintiffs do not oppose the instant motion and do not dispute this point.

            Defendants also assert that “even assuming the 2019 return was required to be filed in California, Holmes has not proven any damages for the filing in Arizona.” (Mot. at p. 15:18-19.) Defendants point to Sulaiman Muhammad’s Special Interrogatory No. 10 to London Holmes, which provides, “[s]tate all facts that support your contention that Sulaiman Muhammad breached an oral contract with you.” (Kossoff Decl., ¶ 2, Ex. A.) The response to Special Interrogatory No. 10 provides, inter alia, that “Plaintiff is likely to incur unnecessary costs associated with having to either file the appropriate tax return in the State of California and/or an amendment to the tax return filed in the State of Arizona.” (Ibid., emphasis added.) Plaintiffs do not oppose the motion and do not address this evidence.

Lastly, Defendants assert that “the undisputed material facts demonstrate that Defendants did not breach a duty of care to LPE in connection with its Paycheck Protection Program loan.” (Notice of Mot. at p. 2:26-28.) As discussed, Plaintiffs allege that “[o]n or about April 8, 2021, while Defendants acted as Plaintiffs’ business managers, they applied for, and ultimately secured, a Payroll Protection Program (‘PPP’) loan from the Small Business Association (‘SBA’) on behalf of LPE, in the amount of $208,333.00.” (Compl., ¶ 15.) Plaintiffs allege that “Defendants…have materially breached the…Agreement by, among other things, failing to comply with the requirements of the U.S. Government in order to obtain PPP loan forgiveness.” (Compl., ¶ 19.)

In his supporting declaration, Mr. Muhammad states that “[d]uring the pandemic, SM Advisors was able to obtain a Paycheck Protection Program (‘PPP’) loan for LPE. The PPP loan in the amount of $208,333 was received by LPE on or about April 27, 2021. Prior to applying LPE for the loan, I informed Holmes and Ms. Mack that the program offers loans to companies with payroll and that the purpose of such a loan for LPE would be to use towards payments of employees on payroll, in which case the loan was forgivable.” (Muhammad Decl., ¶ 9.)

Mr. Muhammad further states that “Holmes instructed me to use the PPP loan proceeds to pay the following persons…(1) London Holmes (CEO); (2) Cheryl Mack (Management); (3) Adellyn Polomski (Management); (4) Alex Hartnett (Attorney); (5) Colby Daniels (Road Manager); (6) Vonecia Andrews (Marketing Manager); (7) Lorna Martinez (Personal Manager); (8) Adam Sheridan-Taylor (Photographer).” (Muhammad Decl., ¶ 10.) Mr. Muhammad states that “[t]hese persons had historically been paid by LPE as independent contractors, including submitting W-9s to and/or receiving 1099s from LPE, or otherwise had never been paid as employees.” (Muhammad Decl., ¶ 11.) Defendants argue that “[i]t is no fault of SM Advisors that these people, in good faith, could not be characterized as employees; in fact, it would have been improper for SM Advisors to have characterized them as such in order for LPE to seek to improperly obtain loan forgiveness.” (Mot. at p. 16:7-9.)

As discussed, Plaintiffs do not oppose the instant motion. Plaintiffs thus do not dispute that “Defendants did not breach a duty of care to LPE in connection with its Paycheck Protection Program loan.” (Notice of Mot. at p. 2:27-28.)

Based on the foregoing, the Court finds that Defendants have met their burden of demonstrating that the second cause of action of the Complaint is without merit, and that Plaintiffs have failed to raise a triable issue of material fact as to this cause of action.

Conclusion

Based on the foregoing, Defendants’ motion for summary judgment is granted.

Defendants are ordered to file and serve a proposed judgment within 10 days of the date of this Order.  

Defendants are ordered to give notice of this Order. 

DATED:  May 9, 2024                                   ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court