Judge Upinder S. Kalra, Case 19STCV31236 2022-12-19 Tentative Ruling

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MOVING PARTY: Defendants Arches & Halos LLC, Beauty Partners LLC, and Barry Shields

1. An order granting a motion for summary judgment, or alternatively summary adjudication, as to the fourth, fifth, and sixth causes of action.

1. Motion for Summary Judgment, or Alternatively Summary Adjudication is DENIED, as to causes of action 4, 5, and 6.

On September 4, 2019, Plaintiffs Ashley Hensarling and Sandra Hensarling, individually and derivatively on behalf of BrowGal, LLC (“Plaintiffs”) filed a complaint against Defendants Tonya Crooks, Shaun O’Halloren, Lindsay Pacifico, Arches & Halos, LLC, Browgal, LLC, and Does 1 through 50 (“Defendants”). The complaint alleged five causes of action: (1) Fraud, (2) Breach of Fiduciary Duty, (3) Negligence, (4) Unfair Competition, and (5) Accounting. The complaint alleges that the plaintiffs invested $300,000 into the Defendants company. However, the Defendants took the money to satisfy old debts and for own personal expenditures. Later, the Defendants started a competing company to the detriment of BrowGal.

On February 5, 2020, Defendants Arches & Halos, LLC, Beauty Partners, LLC, and Barry Shields filed an Answer.

On February 19, 2020, Defendants Lindsay Pacifico and Tonya Crooks filed a Demurrer without a Motion to Strike, which was OVERRULED.

On September 9, 2021, Plaintiffs filed a Request for Dismissal as to Defendant Lindsay Pacifico only.

The current Motion for Summary Adjudication was filed on August 5, 2022. Plaintiff’s Opposition was filed on December 5, 2022.

Plaintiff contends that Defendant’s motion is defective. Specifically, under Rule 3.1350(b), the “specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.” Plaintiff argues that there is one separate statement, but does not repeat the facts that correspond to each issue they seek to adjudicate.

Additionally, Plaintiff also argues that Defendant violated Rule 3.1350(g), as the compendium of evidence submitted by Defendant exceeds 25 pages long, but is not separately bound and does not include a table of contents.[1] Here, Defendant submitted 100 pages of evidence.

While failure to comply can be grounds for the denial of the motion, (C. Procedural Requirements—Moving Party, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 10-C, d. [10:97]) the court will rule on the merits.

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A defendant or cross-defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) “Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant 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)(2).) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.) “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.” (Id. at p. 467; Code Civ. Proc., § 437c, subd. (c).)

Defendants Arches & Halos LLC, Beauty Partners, LLC and Barry Shields (“BP Defendants”) moves for summary judgment, or alternatively, summary adjudication on the grounds that the SAC fails to include the BP Defendants in any of the causes of action.[2] Additionally, Defendants argue that the fourth through sixth causes of action fail because Plaintiffs cannot establish the required elements of each cause of action.

“Liability may ... be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person.” (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.)

BP Defendants argue that Plaintiffs cannot establish that Defendants had actual knowledge required for aiding and abetting because there is no evidence that BP had “actual knowledge that Crooks was breaching her fiduciary duty by working to develop and launch A&H for her own benefit, rather than for BrowGal’s benefit.” (Motion 13: 10-13; UMF 16-18, 19-21.)

Even assuming that BP Defendant met their initial burden, the court finds that Plaintiff has met their burden to show that a triable issue of material fact exists as to the element of knowledge and substantial assistance or encouragement. As stated above, liability can be imposed when a person knows conduct is a breach of duty and nonetheless gives substantial assistance or encouragement. Here, the evidence demonstrates that Defendant Crooks was informed by her independent counsel of a potential breach, when she agreed to work with BP Defendants in her own capacity, rather than on behalf of BrowGal, LLC. (PUMF 1.) Additionally, the evidence also shows that Defendant Crooks forwarded this email to Defendant Barry Shields, stating “From my Atty please let me know your thoughts.” (Id.) Further, Defendant Shields then forwarded the email to Bruce Kowalsky, Shield’s partner who started Innovative Beauty Group as well as BP. (Dec. Shields, ¶ 6.) As Defendants later state, the negotiations for the business arrangements did not start until 2019, well after the emails were provided to BP. (Motion 14: 7-13, UF 25-31.) These emails occurred in May 2018, which was after the February 2018 meeting with Target. (PUMF 1-2.) These communications constitute circumstantial evidence that Defendants had knowledge of Defendant Crooks’ breach and yet they continued to work with her. Arguably, this Defendants’ conduct following this knowledge constitutes “substantial assistance or encouragement” to Defendant Crooks’ alleged malfeasance. Thus, Plaintiff has established that there are triable issues of material fact, as it concerns Defendants’ knowledge and substantial assistance or encouragement.

Therefore, Motion for Summary Adjudication is DENIED, as to the Fourth Cause of Action.

Fifth Cause of Action: Intentional Interference with Prospective Economic Advantage

The elements of an intentional inference with prospective economic advantage cause of action are: “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship… (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Golden Eagle Land Investment, L.P. v. Rancho Santa Fe Assn. (2018) 19 Cal.App.5th 399, 429–430.)

“[T]he alleged interference must have been wrong by some measure beyond the fact of the interference itself. [Citation.] For an act to be independently wrongful, it must be ‘unlawful, that is, …it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.’ [Citation.] The independently wrongful act must be the act of interference itself, but such act must itself be independently wrongful. That is, ‘[a] plaintiff need not allege the interference and a second act independent of the interference. Instead, the plaintiff must plead and prove that the conduct alleged to constitute interference was independently wrongful, i.e., unlawful for reasons other than that it interfered with a prospective economic advantage. [Citations.]’ [Citation.]” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404.)

BP Defendants argue that Plaintiff cannot establish the first and third elements. As to element one, BP Defendant contends that Plaintiff cannot point to a contract that “BrowGal would have consummated with Crooks but for the alleged interference.” As such, Plaintiff will be unable to establish that there was a probability of some future benefit to Plaintiff. As to the third element, BP Defendants contend that Plaintiff will fail for two reasons. First, BP Defendants contend that Plaintiff cannot establish BP Defendants engaged in an independently wrongful act. Second, Plaintiff cannot establish that the BP Defendants acted with either a desire to interfere or knowledge that interference was certain or substantially certain to occur (Motion 17: 11-15.)

The court finds that BP Defendants have not met their burden of showing that the cause of action for breach of intentional interference with prospective economic advantage has no merit. . As to the first element, BP Defendants themselves assert that they initially believed that . “they were discussing and offering a potential partnership with BrowGal, not Crooks individually.” This is sufficient evidence of a probability of some future benefit for BrowGal. As to the second element, as shown above, the email exchanges sufficiently provide evidence of both an independent wrongful act and knowledge on the part of the BP Defendants. (PUMF 1-2.)

Therefore, Motion for Summary Adjudication is DENIED, as to the Fifth Cause of Action.

Unfair competition is any unlawful, unfair, or fraudulent business practices or act and unfair, deceptive, untrue, or misleading advertising. (Bus. & Prof. Code § 17200.) “An unlawful business practice or act within the meaning of the UCL is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” (Bernardo v. Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322, 351. A plaintiff needs to identify statutory, regulatory, or decisional law that the defendant has violated. (Id. at 352.) Unfair competition “borrows” violations of other laws and authorizes a separate action pursuant to unfair competition. (See Farmers Ins. Exch. v. Superior Court (1992) 2 Cal.4th 377, 383.) Unfair conduct in unfair competition actions must be violative of public policy and “tethered to specific constitutional, statutory, or regulatory provisions.” (Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940.) As a statutory cause of action, allegations of unfair business practices must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.) The statutory violations must be specifically delineated and said violations must relate to a business activity. (Id.)

BP Defendants argue that Plaintiff cannot establish a claim under any of the three prongs under a UCL claim. The unlawful prong is not satisfied because the aiding and abetting and IIPEA claims fail. Additionally, BP Defendants argue that the unfairness prong is not met because there is no evidence that Defendants’ conduct “violates antitrust laws or public policy.” (Motion 19: 19-20.) Lastly, BP Defendants argue that the fraudulent prong is not met because Plaintiffs cannot show that “members of the public are likely to be deceived.” (Motion 19: 14-16.)

The court finds that BP Defendants have not met their burden of showing that the cause of action for Unfair Competition because BP Defendants have not shown that one of the prongs under UCL claim cannot be established.

The Court in Cel-Tech Communications, Inc., stated that “because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. ‘In other words, a practice is prohibited as “unfair” or “deceptive” even if not “unlawful” and vice versa.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Here, as stated above, there are triable issues of material fact as to whether Defendants’ conduct was unlawful. The language of the UCL states “or” rather than “and.” Thus, because Plaintiffs have established that there are triable issues as to Defendants’ knowledge, the UCL claim is still viable under the unlawful prong.

Therefore, Motion for Summary Adjudication is DENIED, as to the Sixth Cause of Action.

Motion for Summary Judgment, or Alternatively Summary Adjudication is DENIED, as to causes of action 4, 5, and 6.

[1] Rules of Court, Rule 3.1350(g): “If evidence in support of or in opposition to a motion exceeds 25 pages, the evidence must be separately bound and must include a table of contents.”

[2] The Court notes that a Third Amended Complaint was filed, after Plaintiffs moved for leave to amend. The Court granted leave and the TAC was filed on November 8, 2022. A review of both the SAC and the TAC indicates that the only changes made were naming BP in the 4^th – 6^th causes of action as a Defendant. Thus, the operative complaint is the TAC, which names BP.