Judge Teresa A. Beaudet, Case Number: 24STCV03459, Date: 2024-08-05 Tentative Ruling

On February 9, 2024, Plaintiffs Sukhinderpal Gill and Angela Hercilia Ganem, individually and as Trustees of the PSG Family Hycet Trust u/d/t December 6, 2011, the AHG Family Hycet Trust, u/d/t December 6, 2011, and the Gill and Ganem Trust amended and restated u/d/t September 5, 2012 (collectively, “Plaintiffs”) filed a Complaint for Specific Performance in this action against Defendants Behzad Cohan and Nori D. Cohan, individually and as Trustees of the BC Family Hycet Trust u/d/t December 6, 2011, the NC Family Hycet Trust u/d/t December 6, 2011, and the Behzad and Nori D. Cohan Trust amended and restated u/d/t August 1, 2012 (collectively, “Defendants”).

A pleading is uncertain if it is ambiguous or unintelligible. (¿Code Civ. Proc., § 430.10, subd. (f)¿.) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2¿.) However, “¿[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.¿” (¿Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616¿.)¿¿

In the Complaint, Plaintiffs allege that “[f]or several months in 2023, Plaintiffs and Defendants discussed one party buying out the other’s interest in companies that they jointly owned with each side having a 50% interest. Plaintiffs and Defendants had been in business together for twenty-five years.” (Compl., ¶ 7.)

“After extensive preliminary negotiations beginning in mid-August 2023, including through their individual attorneys, Plaintiffs and Defendants executed a Binding Letter of Intent on October 23, 2023 in Los Angeles County wherein one would purchase the other’s 50% interests in their jointly owned companies that are listed in Exhibit B of the Binding Letter of Intent…” (Compl., ¶ 10.) Plaintiffs refer to the Binding Letter of Intent as the “Contract” in the Complaint. (Compl., ¶ 10.) “Paragraph 3 of the Contract required: ‘the Parties shall execute a Stock Membership Interest Purchase Agreement (“PSA”) that shall contain materially the same terms and conditions describe [sic] in this Letter of Intent, and will incorporate an attachment that will identify the name of the Purchasing Party and the Selling Party and the final Purchase Price when and as determined.” (Compl., ¶ 11.)

“After the Contract was executed, the parties exchanged bids as required in Paragraph 2a and b of the Contract.” (Compl., ¶ 12.) “[O]n November 17, 2023, in accordance with Paragraph 2f and g of the Contract, Plaintiffs were the Purchasing Party for the purchase price of $7,252,126.18 so long as they provided proof of financial ability to do so...” (Compl., ¶ 13.) “On December 22, 2023, in accordance with Paragraph 2c and d of the Contract, Plaintiffs, as the Purchasing Party, provided Defendants with the Financing Commitment in the amount of over $9,700,000.” (Compl., ¶ 14.)

“[O]n January 18, 2024, Defendants’ attorney sent a letter to Plaintiffs’ attorney stating: The Cohan’s [sic] wish to propose an offer to dramatically change this current transaction. The Cohan’s [sic] wish to buy the Gill’s 50% interest for $11.5 million. If this is acceptable, please advise by 5 pm on Monday, January 22, 2024 so that the purchase and sale documents that are being drafted can be revised to reflect the changes contained herein. If this is not acceptable, please let us know so we may proceed with the current transaction.” (Compl., ¶ 23.) “On January 22, 2024, Plaintiffs’ attorney sent Defendants a rejection of Defendants’ $11,500,000 offer…” (Compl., ¶ 24.) On January 29, 2024, Defendants’ attorney emailed Plaintiffs’ attorney a letter stating that “the Cohan parties will no longer participate in the sale of their ownership interest…” (Compl., ¶ 25.)

“Under the Contract, Defendants were obligated to execute the PSA within 30 days after the Bid Election date of October 28, 2023 (as extended by the parties), but Defendants have refused to comment on and execute the PSA after weeks of promising to do so. Instead, Defendants tried to flip the PSA on its head by offering to buy Plaintiffs’ 50% interest for $11,500,000.” (Compl., ¶ 27.) “Defendants have refused to transfer their 50% interest in the Companies described in Exhibit B of the Contract.” (Compl., ¶ 29.) Plaintiffs allege that they “are entitled to specific performance of the terms and conditions, of the Contract by court order, inter alia, ordering Defendants to complete the transfer of their 50% interest in the Companies jointly owned and operated by Plaintiffs and Defendants as described in Exhibit B of the Contract.” (Compl., ¶ 31.)

In the demurrer, Defendants assert that Plaintiffs have not met the “standard for pleading the equitable cause of action or remedy of specific performance.” (Demurrer at p. 5:20-21.)

Defendants note that “[t]o obtain specific performance, a plaintiff must make several showings, in addition to proving the elements of a standard breach of contract…Notably, the terms must be sufficiently certain to make the precise act which is to be done clearly ascertainable.” (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409 [internal quotations omitted].) Defendants cite to Autry v. Republic Productions, Inc. (1947) 30 Cal.2d 144, 151-152, where the California Supreme Court noted that “[t]here is no dispute that neither law nor equity provides a remedy for breach of an agreement to agree in the future. Such a contract cannot be made the basis of a cause of action. The court may not imply what the parties will agree upon.” (Internal citations omitted.) Defendants assert that here, “[a]t most, there was an ‘agreement to agree’, which is not an enforceable contract.” (Demurrer at p. 6:18.)

Defendants also cite to Store Properties, Inc. v. Neal (1945) 72 Cal.App.2d 112, 116, where the Court of Appeal noted that “[w]hile it is a cardinal principle of natural justice that a person shall perform his agreement, yet in order for it to be enforcible it must be definite and certain in its terms and he who demands specific performance must establish by clear and satisfactory proof the existence of the contract alleged. If the things mentioned in the agreement are the subject of future ascertainment then the agreement is not final but is indefinite and uncertain in its terms and cannot be enforced in equity.”

Defendants argue that as to the alleged Binding Letter of Intent (herein, the “LOI”), “pricing is not finalized and is fatally uncertain. There is a convoluted ‘Bid Procedure’ which is clearly something in the supposed agreement that is ‘the subject of future ascertainment.’” (Demurrer at p. 10:6-8.) But Defendants do not appear to discuss the specific “Bid Procedures” contained in paragraph 2 of the LOI, or explain why such procedures are purportedly the “subject of future ascertainment.” (Compl., ¶ 10, Ex. 1, ¶ 2.)

Defendants also assert that “the LOI expressly contemplates a second, final and binding Purchase and Sale Agreement (‘PSA’), finalizing unsettled terms. This is strongly indicative of a classic mere ‘agreement to agree’. While the LOI bears the label ‘binding’, that label is belied by the requirement of a finalizing PSA.” (Demurrer at p. 10:10-13.) Paragraph 3 of the LOI provides that “[w]ithin thirty (30) days after the Bid Election date described in paragraph 1(b), the Parties shall execute a Stock and Membership Interest Purchase Agreement (‘PSA’) that shall contain materially the same terms and conditions described in this Letter of Intent, and will incorporate an attachment that will identify the name of the Purchasing Party and the Selling Party and the final Purchase Price when and as determined.” (Compl., ¶ 10, Ex. 1, ¶ 3.)

In response to Defendants’ argument that the LOI contemplates a purchase agreement, Plaintiffs assert that “[a]n agreement is not unenforceable merely because it is subject to the approval of a formal contract.” (Opp’n at p. 13:14-15.) Plaintiffs cite to Gavina v. Smith (1944) 25 Cal.2d 501, 503, where the California Supreme Court noted that “[w]hether the exercise of an option creates a lease or merely an executory contract to make a lease depends primarily upon the intention of the parties.” The Gavina Court noted that “Plaintiffs’ contention that only a contract to make a lease was created by the exercise of the option is based upon the understanding that the form of lease attached to the option agreement was to be completed and signed by the parties after the exercise of the option. Where the parties, however, have agreed in writing upon the essential terms of the lease, there is a binding lease, even though a formal instrument is to be prepared and signed later.” (Id. at p. 504.)

Plaintiffs also assert that “the binding letter of intent and the allegations are sufficient to state a cause of action for specific performance.” (Opp’n at p. 7:1-2.) Plaintiffs cite to Patel v. Liebermensch (2008) 45 Cal.4th 344, 349, where the California Supreme Court noted that “[t]he equitable remedy of specific performance cannot be granted if the terms of a contract are not certain enough for the court to know what to enforce. However, [t]he law does not favor but leans against the destruction of contracts because of uncertainty; and it will, if feasible, so construe agreements as to carry into effect the reasonable intentions of the parties if [they] can be ascertained…” (Internal quotations and citations omitted.)[1] In addition, Plaintiffs cite to California Food Service Corp. v. Great American Ins. Co. (1982) 130 Cal.App.3d 892, 897, where the Court of Appeal noted that “[a] letter of intent can constitute a binding contract, depending on the expectations of the parties. These expectations may be inferred from the conduct of the parties and surrounding circumstances.” (Internal citations omitted.)

Plaintiffs note that the first paragraph of the LOI lists the parties to the LOI. (Compl., ¶ 10, Ex. 1, p. 1.) In addition, Plaintiffs assert that the LOI “set an agreed upon formula to reach a price in paragraph 2a and b…” (Compl., ¶ 10, Ex. 1, ¶ 2.) Plaintiffs also assert that Defendants’ argument “that ‘pricing is not finalized and is fatally uncertain’ is refuted by the allegation that Plaintiffs agreed to pay and Defendants agreed to accept the price of $7,252,126.18.” (Opp’n at p. 8:18-20.) The Complaint alleges that “Defendants declined to purchase the interest at that price which then gave Plaintiffs the right to purchase Defendants’ interest for $7,252,126.18 as expressly reiterated in Defendants’ signed November 17, 2023 letter to Plaintiffs.” (Compl., ¶ 12.)

Plaintiffs also assert that the time and manner of payment is alleged in paragraph 2c of the alleged LOI, which provides that “[b]eginning on the Bid Election Date and continuing for a period of sixty (60) days thereafter (‘Financing Period’), the Party who is required to purchase the other Party’s interests in the Companies (‘Purchasing Party’) shall provide to the Party that is required to sell their interests in the Companies (‘Selling Party’) the Purchasing Party’s documentation sufficient to demonstrate the Purchasing Party’s ability to fully purchase the Selling Party’s interest, with the combination of cash assets and financing from lenders or financing from financial institutions (‘Financing Commitment’) for the full purchase price (‘Purchase Price’), and to close the purchase by not later than Period 1 2024 as described in paragraph 4(l) hereof (‘Closing Date’), pursuant to the terms of a more definitive Stock and Membership Interest Purchase Agreement to be executed by the Parties as described in paragraph 2.” (Compl., ¶ 10, Ex. 1, ¶ 2(c).)

In addition, Plaintiffs assert that “the property to be transferred is alleged in Exhibit B attached to Exhibit 1 in the Complaint.” (Opp’n at p. 9:6-7.) Paragraph 1 of the LOI provides that “[t]he Parties agree that one of the Parties shall be entitled to purchase from the other Party one hundred percent (100%) of the other Party’s right, title and interest in the Companies described on Exhibit B, including but not limited to, all furniture and fixtures, machinery and equipment, electronic devices such as computers and software, intellectual property, leasehold and leasehold improvements, liquor licenses, goodwill, franchise rights and fees, electronic and paper files, intellectual property, emails and accounts and related login and passwords…capitalized start-up costs, and all other tangible and intangible assets associated with ownership and operation of the Businesses owned by the Companies, pursuant to the Bid Procedures described below.” (Compl., ¶ 10, Ex. 1, ¶ 1.)

Based on the foregoing, the Court finds that Plaintiffs have shown that the terms of alleged LOI are “sufficiently certain to make the precise act which is to be done clearly ascertainable.” (Darbun Enterprises, Inc. v. San Fernando Community Hospital, supra, 239 Cal.App.4th at p. 409 [internal quotations omitted].)

In the demurrer, Defendants also contend that “the fact that the entities actually operating most of the businesses, the LLCs, are not parties to the LOI or this lawsuit is a classic misjoinder/non-joinder/defect in alleging necessary parties. Plaintiffs simply disregard those legal entities in favor of naming only the individuals and trusts who may allegedly have the ultimate control over the LLCs.” (Demurrer at p. 4:23-26.) Defendants assert that “the LOI includes a lengthy list of businesses subject to the purchase and sale. All but 4 of these businesses are listed as owned by several different legal entities listed in the table following page 13 of the LOI, including: CGHG, LLC; CGII, LLC; CGYL, LLC; and SFT, LLC.” (Demurrer at p. 10:18-20.) As an initial matter, the Court notes that there does not appear to be any table following page 13 of the LOI. (Compl., ¶ 10, Ex. 1.) Page 14 of the LOI concerns “Indemnification Procedures (Third Party Claims).” (Compl., ¶ 10, Ex. 1.) In addition, Defendants do not appear to cite any legal authority demonstrating why the foregoing entities must purportedly be joined to the instant action.

As noted by Plaintiffs, Code of Civil Procedure section 389, subdivision (a) provides that “[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.” The demurrer does not contain any discussion of these factors. The Court does not find that Defendants have shown that “there is a defect or misjoinder of parties.” (Demurrer at p. 3:10-11.)

In light of the foregoing, the Court overrules Defendants’ demurrer to the Complaint.[2]

Based on the foregoing, the Court overrules Defendants’ demurrer to the Complaint.

The Court orders Defendants to file and serve their answer(s) to the Complaint within 10 days of the date of this Order.¿¿

[1]Plaintiffs note that the Patel Court found that “[a]n agreement for the purchase or sale of real property does not have to be evidenced by a formal contract drawn with technical exactness in order to be binding…The material factors to be ascertained from the written contract are the seller, the buyer, the price to be paid, the time and manner of payment, and the property to be transferred, describing it so it may be identified…” (Patel v. Liebermensch, supra, 45 Cal.4th at p. 349.) However, the allegations here do not appear to involve the sale of real property.

[2]The Court notes that Defendants raise a number of arguments for the first time in the reply. However, ¿“[p]oints raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.¿” (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453¿.) Thus, the Court declines to consider Defendants’ new arguments in the reply.

Superior Court of California

County of Los Angeles

Department 50