Judge: Teresa A. Beaudet, Case: 24STCV16150, Date: 2024-11-14 Tentative Ruling

Case Number: 24STCV16150    Hearing Date: November 14, 2024    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Venice Venture, LLC (“Plaintiff”) filed this action on June 27, 2024 against Defendants Stephen James Baumann, Sandeep Virk, Arvinder Kaur Virk, Jivana Café, and Indian Summers, LLC (collectively, “Defendants”). The Complaint alleges causes of action for (1) breach of contract, (2) negligent misrepresentation, (3) intentional misrepresentation,

(4) violation of Business and Professions Code section 17200, and (5) declaratory relief.

Defendants now move for an order striking certain portions of Plaintiff’s Complaint. The motion is unopposed.

Request for Judicial Notice

The Court denies Defendants’ request for judicial notice as to Exhibits A and I. The Court grants Defendants’ request for judicial notice as to Exhibits B, C, D, E, F, G, H, J.

Discussion

A.    Allegations of the Complaint

In the Complaint, Plaintiff alleges, inter alia, that “Plaintiff leased the real property located at 20 Washington Blvd., Venice, CA, 90292 (hereinafter ‘Subject Property’) to the Defendants on or about December 15, 2019.” (Compl., ¶ 10.) “This Lease was set to start…on February 1, 2020 to February 1, 2023 but the Defendants breached the Lease…” (Compl., ¶ 10.)

“On or about December 1, 2019, [Sandeep Virk] contacted the Plaintiff’s principal, Mr. Mostafa Karimbeik (the ‘Owner’), to discuss leasing the Subject Property from the Plaintiff to open the Cafe. [Sandeep Virk] claimed that she and her husband were experienced restauranters with over ten (10) years’ experience. [Sandeep Virk] asserted that they had a lunch truck worth $70,000.00 and just needed the right financing to open up the Cafe at a good location such as the Subject Property.” (Compl., ¶ 18.) These “representations were made with the intent to induce the Plaintiff into entering into the Lease which the Defendants never intended to honor.” (Compl., ¶ 19.)

 “Defendants used the Lease they obtained from the Plaintiff under false pretense to seek and obtain an EIDL loan during Covid-19 pandemic.” (Compl., ¶ 20.) “[A]fter the EIDL loan was approved and paid to the Defendants, the Defendants canceled the Lease, and disappeared as if the aforementioned loan was never made.” (Compl., ¶ 22.) “Defendants…never intended to open up the Cafe at the Subject Property and…never intended to Lease the Subject Property from the Plaintiff to conduct legitimate business at the Subject Property.” (Compl., ¶ 24.) Defendants “sought an EIDL loan for the sum of $500,000.00 to open up the Cafe at the Subject Property via the…Lease under false pretense in order to defraud the Plaintiff and to embezzle the EIDL loan proceeds.” (Compl., ¶ 23.)

B.    Legal Standard

The anti-SLAPP statute is “a mechanism through which complaints that arise from the exercise of free speech rights can be evaluated at an early stage of the litigation process and resolved expeditiously.” ((Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073 [internal quotations omitted].) Courts use a two-step process for determining whether an action is a strategic lawsuit against public participation, or a SLAPP. First, the court determines whether the defendant has established that the challenged claim arises from protected speech. ((Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) If such a showing has been made, the court “determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Ibid.)

C.    Prong One – Arising from Protected Activity

“[T]he only thing the defendant needs to establish to invoke the protection of the SLAPP statute is that the challenged lawsuit arose from an act on the part of the defendant in furtherance of her right of petition or free speech.” ((Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 307.) An act in furtherance of a person’s right of petition or free speech includes the following:

“(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.”

(Code Civ. Proc., § 425.16, subd. (e).)

In determining whether a cause of action arises from protected conduct, the court focuses on “the allegedly wrongful and injury-producing conduct that provides the foundation for the claims.” ((Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490-491.) “[T]he critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.” ((Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (emphasis in original).) In making this determination, the Court considers “the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (Ibid.)

Defendants argue that here, Plaintiff’s “second through fifth causes of action arise from a protected activity.” (Mot. at p. 7:3.) Defendants assert that their “‘use of the lease’ to apply for an EIDL loan—i.e., their statements to the SBA to apply for the loan—is alleged by Plaintiff to support the requisite element of intent for its misrepresentation claims as well as form the bases of its claims for declaratory relief and unfair business practices.” (Mot. at p. 8:12-15.)

In the second cause of action for negligent misrepresentation, Plaintiff alleges, inter alia, that “Defendants made the promises and representations about the Lease, Cafe, and Indian Summers, they did so without any reasonable basis to believe they were true and with the intent and knowledge that Plaintiff would rely upon them. Specifically, prior to the entering into the Lease…Mrs. Virk contacted the Owner of the Plaintiff about leasing the Subject Property and the Defendants plans to open up the Cafe and/or a restaurant business involving Indian Summers.” (Compl., ¶ 37.) Plaintiff alleges that that “Mrs. Virk’s alleged plans for the Cafe were nothing more than clever lies which were intended to defraud the Plaintiff and its Owner.” (Compl., ¶ 40.) As set forth above, Plaintiff alleges that “Defendants, and each of them, sought an EIDL loan for the sum of $500,000.00 to open up the Cafe at the Subject Property via the enclosed Lease under false pretense in order to defraud the Plaintiff and to embezzle the EIDL loan proceeds.” (Compl., ¶ 23.)

In the third cause of action for intentional misrepresentation, Plaintiff alleges, inter alia, that “Defendants did not have any intent to open up the Cafe or any business involving Indian Summers at the Subject Property via the Lease. Instead, the Defendants wanted to procure the Lease from the Plaintiff in order to obtain an EIDL loan without any intent to actually use the EIDL loan proceeds to open up the Cafe at the Subject Property.” (Compl., ¶ 44.) Plaintiff alleges that “Defendants intentional [sic] misled and fraudulently induced the Plaintiff into providing the Defendants with the Lease which the Defendants used to obtain an EIDL loan to supposedly start up the Cafe at the Subject Property. Instead, as alleged above, the Defendants, and each of them, usurped, converted and/or embezzled the proceeds from the EIDL loan and used the same to purchase luxury real estate and other properties.” (Compl., ¶ 45.)

In the fourth cause of action for unfair business practices, Plaintiff alleges, inter alia, that “Defendants…have acted maliciously and intentionally, as described herein, to defraud the Plaintiff and the public. These acts and omissions constitute unlawful or unfair business practices against Plaintiff in violation of California Business and Professions Code § 17200, et seq.” (Compl., ¶ 52.) As set forth above, Plaintiff alleges that Defendants “sought an EIDL loan for the sum of $500,000.00 to open up the Cafe at the Subject Property via the…Lease under false pretense in order to defraud the Plaintiff and to embezzle the EIDL loan proceeds.” (Compl., ¶ 23.) In the fifth cause of action for declaratory relief, Plaintiff alleges, inter alia, that “Plaintiff desires a judicial determination and declaration that Lease of the Subject Property was misused by the Defendants, and each of them, to obtain an EIDL loan under false pretense. Therefore, the actions of the Defendants, and each of them, were unconscionable procedurally and substantively.” (Compl., ¶ 64.)

Defendants submit the Declaration of Sandeep Virk, who is a member and CEO of Defendant Indian Summers LLC. (Virk Decl., ¶ 2.) Sandeep Virk states that “[d]ue to the COVID-19 pandemic, Indian Summers applied online for an EIDL loan in or about April 2020,” and that “[t]he EIDL loan was not approved by the SBA until September 2021.” (Virk Decl., ¶¶ 10, 11.) Defendants assert that “[a]pplying for such economic assistance from the government is certainly a ‘petition;’ the submission of an official form, such as an application, is a ‘statement…made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law’ or ‘made in connection with an issue under consideration or review’ by such ‘body’ or ‘official proceeding.’” (Mot. at p. 9:10-13, citing Code Civ. Proc., § 425.16, subds. (e)(1)-(2).)

Exhibit “F” to Defendants’ request for judicial notice is a March 2020 Press Release from the U.S. Small Business Administration which provides, inter alia, “SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19).” (Defendants’ RJN, Ex. F.) This Press Release provides, inter alia, that “[t]he U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19)…SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance…Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities…These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact…SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.” (Defendants’ RJN, Ex. F.) In addition, the U.S. Small Business Administration “official website of the United States government” provides information “about COVID-19 EIDL,” including that “[t]his federal small business loan program supports small businesses’ recovery from the COVID-19 disaster’s economic impacts by providing accessible and borrower-friendly capital.” (Defendants’ RJN, Ex. J.) The website indicates that “[i]n response to COVID-19, small business owners, including agricultural businesses, and nonprofit organizations in all U.S. states, Washington D.C., and territories were able to apply for the COVID-19 Economic Injury Disaster Loan (EIDL). New applications are no longer being accepted.” (Defendants’ RJN, Ex. J.) As discussed, Defendants assert that applying for the SBA’s COVID-19 EIDL loan program is a “protected activity” for purposes of the anti-SLAPP statute.

The Court finds that Defendants have shown that Plaintiff’s second through fifth causes of action arise from protected activity for purposes of the anti-SLAPP statute. As discussed above, these causes of action are based on allegations pertaining to Defendants’ application for an “EIDL loan.” Defendants indicate that “Indian Summers applied online for an EIDL loan in or about April 2020,” which was “approved by the SBA [in] September 2021.” (Virk Decl., ¶¶ 10, 11.) As discussed, Defendants provide evidence that the U.S. Small Business Administration was “to provide [the] disaster assistance loans for small businesses impacted by Coronavirus (COVID-19)” pursuant to an “application process.” (Defendants’ RJN, Ex. F.) As set forth above, protected conduct includes, inter alia, “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law…” (Code Civ. Proc., § 425.16, subds. (e)(1)-(2).) Moreover, as set forth above, the instant motion is unopposed. Thus, Plaintiff does not dispute Defendants’ assertion that the second through fifth causes of action of the Complaint arise from protected activity.

Based on the foregoing, the Court finds that the first prong of the two-step anti-SLAPP analysis is satisfied as to the second through fifth causes of action of the Complaint, and that the burden now shifts to Plaintiff on prong two¿with respect to these causes of action.[1]

D.    Prong Two – Probability of Prevailing

“[P]laintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” ((Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464, 476 [internal quotations omitted].) In making the prong two determination, “the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (Code Civ. Proc., § 425.16, subd. (b)(2).) “The court does not, however, weigh [defendant’s] evidence against the plaintiff’s, in terms of either credibility or persuasiveness. Rather, the defendant’s evidence is considered with a view toward whether it defeats the plaintiff’s showing as a matter of law, such as by establishing a defense or the absence of a necessary element.” ((1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585.)

Defendants first assert that Plaintiff cannot prevail on its negligent or intentional misrepresentation claims. Defendants assert that “[a]ny reliance by Plaintiff on Defendants’ EIDL application as a basis for misrepresentation or proof of fraudulent ‘intent’ must fail. It is logically impossible for Defendants to have intended to sign a lease in December 2019 to fraudulently obtain a COVID related EIDL loan that didn’t exist until Spring 2020.” (Mot. at p. 10:23-26.)

As set forth above, Defendants provide evidence of a Press Release from the U.S. Small Business Administration “[p]ublished on March 16, 2020,” which provides, inter alia, “SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19).” (Defendants’ RJN, Ex. F.) As also discussed, Plaintiff alleges in the Complaint that “[o]n or about December 1, 2019, [Sandeep Virk] contacted the Plaintiff’s principal, Mr. Mostafa Karimbeik…to discuss leasing the Subject Property from the Plaintiff to open the Cafe. [Sandeep Virk] claimed that she and her husband were experienced restauranters with over ten (10) years’ experience. [Sandeep Virk] asserted that they had a lunch truck worth $70,000.00 and just needed the right financing to open up the Cafe at a good location such as the Subject Property. The above-cited express representations were made during meetings, telephone conversations, and emails which occurred sometime around December 1, 2019 to December 31, 2019.” (Compl., ¶ 18, emphasis added.) Plaintiff alleges that these “representations were made with the intent to induce the Plaintiff into entering into the Lease which the Defendants never intended to honor.” (Compl., ¶ 19.) As discussed, Plaintiff further alleges that “[a]s set forth in Paragraphs 18-26 above, the Defendants did not have any intent to open up the Cafe or any business involving Indian Summers at the Subject Property via the Lease. Instead, the Defendants wanted to procure the Lease from the Plaintiff in order to obtain an EIDL loan without any intent to actually use the EIDL loan proceeds to open up the Cafe at the Subject Property.” (Compl., ¶ 44.)

As discussed, Plaintiff does not oppose the instant motion. Thus, Plaintiff does not dispute Defendants’ point that “[t]he SBA did not announce the COVID-19 EIDL program until March 2020,” and that accordingly, “[a]ny reliance by Plaintiff on Defendants’ EIDL application as a basis for misrepresentation or proof of fraudulent ‘intent’ must fail.” (Mot. at p. 10:22-24.)

The Court notes that “[t]he moving party bears the initial burden of establishing a prima facie showing the plaintiff’s cause of action arises from the defendant’s free speech or petition activity…If the defendant establishes a prima facie case, then the burden shifts to the plaintiff to establish a probability that the plaintiff will prevail on the claim, i.e., make a prima facie showing of facts which would, if proved at trial, support a judgment in plaintiff’s favor.” (Kyle v. Carmon (1999) 71 Cal.App.4th 901, 907 [internal quotations and references to [Citation.] omitted, underline added.) The Court does not find that Plaintiff has met this burden here as to the first and second causes of action.

            Defendants also assert that “Plaintiff cannot seek declaratory relief.” (Mot. at p. 12:22.) As discussed above, Plaintiff alleges that it “desires a judicial determination and declaration that Lease of the Subject Property was misused by the Defendants, and each of them, to obtain an EIDL loan under false pretense. Therefore, the actions of the Defendants, and each of them, were unconscionable procedurally and substantively.” (Compl., ¶ 64.) Defendants note that “the declaratory procedure operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” ((Travers v. Louden (1967) 254 Cal.App.2d 926, 931.) Defendants assert that here, “[n]o actual controversy between Plaintiff and Defendants relating to the obligations, invasion of rights, or the commission of wrongs that may be prospectively resolved by the court are alleged in the Complaint. Plaintiff only complains about alleged past actions of Defendants related to their application for an EIDL loan from the SBA.” (Mot. at p. 13:6-9, emphasis omitted.) Plaintiff does not oppose the motion and thus does not dispute this point. The Court does not find that Plaintiff has shown a probability that Plaintiff will prevail on the fifth cause of action for declaratory relief.

            Lastly, Defendants argue that “Plaintiff’s cause of action for unfair business practices also must fail.” (Mot. at p. 13:16.) In the fourth cause of action for violation of Business and Professions Code section 17200, Plaintiff alleges that Defendants “have acted maliciously and intentionally, as described herein, to defraud the Plaintiff and the public.” (Compl., ¶ 52.) Defendants assert that “[w]ith respect to Plaintiff’s claims concerning a ‘fraudulent’ business practice (applying for an EIDL loan under false pretense of the Lease), Plaintiff…lacks standing.” (Mot. at p. 14:13-14.)

“Sections 17200 to 17210 contain what we now refer to as the unfair competition law. The law’s purpose is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. To that end, the UCL takes aim at unfair competition, a term it defines to include any unlawful, unfair or fraudulent business act or practice.” ((California Medical Assn. v. Aetna Health of California Inc. (2023) 14 Cal.5th 1075, 1085 [internal quotations and citations omitted].) “Proposition 64 limited the set of eligible private UCL plaintiffs to those persons who have suffered injury in fact and lost money or property as a result of the business act or practice at issue.” ((Id. at p. 1086 [internal quotations omitted].) Defendants argue that “[t]he question here is whether Plaintiff’s alleged unpaid rent constitutes ‘money or property’ that has been ‘lost … as a result of’ Defendants’ fraudulent business practice of allegedly obtaining a federal business loan by fraud…Was the rent unpaid ‘as a result of’ the fraudulent business practice – the fraudulent application for an EIDL loan? No.” (Mot. at p. 14:20-24.) Indeed, Plaintiff does not appear to allege that it “lost money or property as a result of” Defendants’ alleged fraudulent conduct relating to the “EIDL loan.” (California Medical Assn. v. Aetna Health of California Inc., supra, 14 Cal.5th at p. 1086.) In addition, as discussed, Plaintiff does not oppose the motion. The Court does not find that that Plaintiff has shown a probability that it will prevail on the fourth cause of action for unfair business practices.

Based on the foregoing, the Court finds that Plaintiff has failed to establish a probability of prevailing on its second, third, fourth, and fifth causes of action.

E.     Attorney’s Fees

Pursuant to Code of Civil Procedure section 425.16, subdivision (c)(1), “[e]xcept as provided in paragraph (2), in any action subject to subdivision (b), a prevailing defendant on a special motion to strike shall be entitled to recover that defendant’s attorney’s fees and costs. If the court finds that a special motion to strike is frivolous or is solely intended to cause unnecessary delay, the court shall award costs and reasonable attorney’s fees to a plaintiff prevailing on the motion, pursuant to Section 128.5.” 

In the motion, Defendants state that they “request leave to file an application for fees and costs if the motion is granted in whole or in part.” (Mot. at p. 15:10-11.) Defendants may file a noticed motion concerning the issue of attorney’s fees and costs.[2]

Conclusion

Based on the foregoing, Defendants’ special motion to strike is granted as to the second, third, fourth, and fifth causes of action of the Complaint. Defendants’ special motion to strike is otherwise denied. Defendants are ordered to provide notice of this Order.   

DATED:  November 14, 2024                       ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court