Judge Thomas D. Long, Case 21STCV22749 2022-10-19 Tentative Ruling

On June 17, 2021, Plaintiff Swing Media, Inc. filed this action against Defendants High Times Production, Inc. and High Times Holding Corp. (collectively, “Defendants”), alleging (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) promissory fraud, (4) open book account, and (5) account stated.

On July 12, 2022, Plaintiff filed a motion for summary adjudication of the first, second, fourth, and fifth causes of action.

Plaintiff’s Objection Nos. 1-16 are overruled. The evidence about a settlement is not being introduced to establish liability. (See Evid. Code, § 1152.)

The Court does not consider the Further Declaration of Jason Swing and its Exhibit 1, submitted with Plaintiff’s reply, as the Court generally will not consider new evidence submitted with a reply.¿¿(See¿Jay v. Mahaffey¿(2013) 218 Cal.App.4th 1522, 1537-1538.)

High Times Productions, Inc. (“HTP”) is a wholly owned subsidiary of Trans-High Corporation, which is a wholly owned subsidiary of High Times Holding Corp. (“HTC”). (Levin Decl. ¶ 2; see Levin Depo. at p. 31.)

Plaintiff and HTP entered into Advertising Agreements through which Defendants procured outdoor advertising space and services from Plaintiff from March 2018 through September 2019. (Undisputed Material Facts “UMF” 1.) The Advertising Agreements were also memorialized through invoices. (UMF 2.) The advertisements were satisfactorily displayed on outdoor advertising space in various locations, and Plaintiff performed its obligations under the Advertising Agreements. (UMF 3-4.)

HTP never objected to any of the invoices, and there is no dispute as to the outstanding amount due and owing. (UMF 5.) HTP made sporadic payments to Plaintiff in varying amounts for a period of time, but they stopped making any payments, leaving $220,330.00 due and owing. (UMF 6-7, 9.)

The parties disagree about the existence of a settlement agreement that would resolve the amount owed. (See UMF 12.)

A plaintiff moving for summary adjudication must satisfy the initial burden of proof by proving each element of a cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Then the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

The first cause of action alleges that the parties entered into an Advertising Agreement in which Defendants rented outdoor advertising space from Plaintiff. (Complaint ¶ 28.) Plaintiff fully performed its obligations, but Defendants breached by contract by failing to pay invoices. (Complaint ¶¶ 30-31.) The standard elements of a claim for breach of contract are (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

The second cause of action alleges that Defendants breached the implied covenant of good faith and fair dealing by unfairly interfering with Plaintiff’s right to receive the benefits of the Advertising Agreement by not paying Plaintiff. (Complaint ¶ 38.) “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350.)

The fourth cause of action alleges an open book account in the amount of $220,330.00, based on invoices issued in connection with the Advertising Agreement. (Complaint ¶¶ 62-64.) An open book account is a detailed statement constituting the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, showing the debits and credits, entered in the regular course of business, and kept in a reasonably permanent form and manner. (Code Civ. Proc., § 337a.) (Plaintiff raises this as a ground for the motion but does not further brief it.)

The fifth cause of action alleges that the parties agreed to an account stated in the amount of $220,330.00. (Complaint ¶¶ 68-71.) To succeed in an action for account stated, a plaintiff must show (1) that defendant owed plaintiff money from previous financial transactions; (2) that plaintiff and defendant agreed, by words or conduct, that the amount claimed was the correct amount; (3) that defendant promised, by words or conduct, to pay the stated amount; (4) that defendant has not paid all of the amount owed; and (5) the amount of money defendant owes to plaintiff. (CACI 373; see Zinn v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600.)

It is undisputed that HTP never objected to or paid the full amount of the invoices submitted by Plaintiff. (UMF 5-6; Levin Depo. at pp. 32-33.) HTP agreed that the total amount owed was $220,330.00. (Levin Depo at pp. 36, 41, 43; see UMF 5-7.)

Plaintiff has met its initial moving burden as to the elements of the causes of action, and Defendants do not attempt to dispute this. (See generally Opposition.) Instead, Defendants argue that there is a valid and enforceable contract to settle the amount owed.

Defendants contend that the money is not due and owing because a settlement was reached. (Opposition at pp. 4-5; see Levin Depo. at pp. 44-46.)

Plaintiff contends that they had only discussed a settlement. (Motion at p. 7.) Plaintiff notes that Adam Levin, the Chief Executive Chairperson of High Times Holding Corp., admitted at his deposition that there was no written settlement agreement and no payments were made. (Motion at p. 7; Levin Depo. at pp. 44-45.) However, Defendants’ defense is based on an oral, not written, agreement, so the absence of a written agreement is not dispositive. (See Opposition at pp. 4-5.) Oral settlement agreements are enforceable. (See Gorman v. Holte (1985) 164 Cal.App.3d 984, 989.)

At his deposition, Levin did not recall the terms of the settlement agreement and said, “I’d have to look back and reflect on my notes.” (Levin Depo. at p. 46.) He later recalled “a discussion about it that talked about a discount that we were providing or a premium to the amount owed as opposed to a discount, but using that $11-a-share price by issuing them a premium to the 220,000 to settle it in stock.” (Levin Depo. at p. 70.) The issue was resolved, but he would “have to go through [his] notes” regarding the resolution. (Levin Depo. at p. 70.) Via declaration, Levin later states that he and Maxx Abramowitz met with Jason Swing on March 10, 2020. (Levin Decl. ¶ 4.) They agreed that HTC would pay Plaintiff $100,000.00 in cash and the balance would be paid in HTC stock. (Levin Decl. ¶ 7.) A written settlement was not finalized for several months. (Levin Decl. ¶ 10.)

Plaintiff argues that “the material terms of the purported settlement agreement were simply never presented or agreed to.” (Reply at p. 4.) On April 20, 2020, Majd Elias stated in an email, “We reviewed [the draft agreement] with our counsel (on copy) and it’s different from what we were expecting.” (Levin Depo. at p. 71.) Levin testified that “there was a conversation where I agreed with Mr. Elias and just said, ‘Hey, this is fine. Let’s get this done and let’s move this on.’” (Levin Depo. at p. 72; see id. at p. 73.) However, the email and draft agreement are not provided. There is no evidence of what differed in the draft agreement and whether those differences were substantive with respect to the terms. The Court cannot conclude that this shows that the oral terms were not agreed to.

Although this evidence may not conclusively establish the existence, terms, and validity of the oral agreement, it is sufficient to show that “a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).)

Finally, Plaintiff argues in reply that any settlement negotiations or discussions are inadmissible under Evidence Code section 1152. (Reply at p. 2.) But such evidence is not being used to prove Defendants’ liability for the underlying causes of action. (See Evid. Code., § 1152, subd. (a).) Instead, it is used here to prove or disprove the existence of a settlement agreement as a defense to Plaintiff’s claims. (See Bryon v. MacDonald (1952) 112 Cal.App.2d 57, 59 [“Although an offer of compromise may ordinarily not be shown in evidence, here the purpose of the evidence of the offer was to show its ultimate acceptance, a perfectly proper procedure.”].)

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court