Judge Upinder S. Kalra, Case 22STCV18328 2023-02-22 Tentative Ruling

1. An
order for a judgment on the pleadings as to every cause of action in
Plaintiff’s complaint

1. Motion
for Judgment on the Pleadings is GRANTED, as to all causes of action. Leave to
Amend is DENIED except as to the Promissory Estoppel and Fraud Cause of Action.

On June 3, 2022, Plaintiff Kyce Poya (“Plaintiff”) filed a
complaint against Defendant Shryne Group, Inc., and Jon Avidor (“Defendants.”)
The complaint alleged five causes of action: (1) Breach of Contract, (2) Breach
of the Covenant of Good Faith and Fair Dealing, (3) Promissory Estoppel, (4)
Negligent Misrepresentation, and (5) Intentional Misrepresentation. Plaintiff
alleges that he entered into Call Option Agreement with Defendant SGI. However,
Plaintiff alleges that prior to this agreement, Defendants indicated that there
would be a Roll-Over, whereby Plaintiff’s initial investment of $400,000 into BCOK
would be worth $720,000 when the note converted. Despite these statements, the
Roll-Over did not take place.

On October 19, 2022, Defendant Shryne Group, Inc., filed the
current Motion for Judgment on the Pleadings. Plaintiff’s Opposition was filed
on February 7, 2023. Defendant’s Reply was filed on February 14, 2023.

California
Code of Civil Procedure section 438 states, in relevant
part:  “(b)(1) A party may move for judgment on the pleadings. . . .
(c)(1)  The motion provided for in this section may only be made on
one of the following grounds: . . . . (B)  If the moving party is a
defendant, that either of the following conditions exist: (i)
The court has no jurisdiction of the subject of the cause of action
alleged in the complaint.  (ii)  The complaint does not
state facts sufficient to constitute a cause of action against that defendant.”

A motion
for judgment on the pleadings “has the purpose and effect of a general
demurrer.”  (Smiley v.
Citibank (South Dakota), N.A. (1995) 11 Cal.4th 138, 146
(citation omitted).)  “[T]he trial court generally confines
itself to the complaint and accepts as true all material facts alleged
therein.  As appropriate, however, it may extend its consideration to
matters that are subject to judicial notice.  In this, it performs
essentially the same task that it would undertake in ruling on a general
demurrer.”  (Id. (citations
omitted).)

A party
moving for judgment on the pleadings must meet and confer in person or
telephonically with the party who filed the pleading that is subject to the
motion to determine if an agreement can be reached regarding the claims raised
in the motion. (Code Civ. Proc. § 439, subd. (a).) The moving party
must file a declaration detailing the meet and confer efforts. (Code Civ.
Proc. § 439, subd. (a)(3).) The Declaration of Rajesh Mandlekar indicates that
the parties spoke on October 11, 2022 on the phone and were unable to resolve
the issues. (Dec. Mandlekar ¶ 2.)

Defendant Shryne Group, Inc.,
moves for a judgment on the pleadings as to all five causes of action.

Defendant argues that the breach
of contract cause of action fails because Plaintiff does not allege a breach of
the written Call Option Agreement (“COA.”) Additionally, Defendant argues that
the alleged oral agreement is unenforceable for six main reasons: (1) the parol
evidence bars enforcement because the COA contains an integration clause; (2) the
statute of limitation bars enforcement because the alleged representations were
made in August 2019 and this matter was not filed until June 2022, past the 2 and
half year (including the Judicial Council’s Emergency Rule 9(a) additional
time); (3) the alleged conversations were “possibilities” (Comp. ¶ 40) and do
not result in a contract; (4) the complaint does not indicate a satisfaction of
the new conditions of the alleged oral agreement – board approval and the
sending of paperwork; (5) the oral agreement was not reduced to a writing; and
(6) the oral agreement lacked consideration because the complaint does not
allege that Plaintiff made a loan to Defendant SGI.

Plaintiff
argues that the breach of contract claim is sufficient for three reasons.
First, the integration clause and the parol evidence do not bar this claim
because the complaint states SGI’s board of directors approved the “roll-over”
in December 2019 and therefore, “drawing all reasonable inferences in
Plaintiff’s favor, Plaintiff has alleged that SGI exercised its call option
ipso facto pursuant to the COA, but then never delivered the shares to
Plaintiff.” (Opp. 4: 1-5.)[1]
As for the integration clause argument, Plaintiff argues that there is an issue
of fact to be determined as to what the “subject matter” of the COA. (Opp. 4:
22-26.) Second, the statute of limitations does not bar this action because the
complaint does not indicate when Plaintiff discovered Defendant was not going
to abide by the agreement. The use of the word “immediately” is a “term of art,
and obviously, cannot mean that SGI was required to convert Plaintiff’s shares
at the exact same time they struck the bargain.” (Opp. 5: 23-25.) Lastly, the
oral agreement did not lack consideration because the complaint states that in
exchange for SGI’s right to convert Plaintiff shares of BCOK into SGI shares,
Plaintiff would receive SGI shares.

Breach of
contract requires the Plaintiff to prove “(1) the existence of the contract,
(2) plaintiff's performance or excuse for nonperformance, (3) defendant's
breach, and (4) the resulting damages to the plaintiff.” (D'Arrigo Bros. of California v. United Farmworkers of America
(2014) 224 Cal.App.4th 790, 800).

After
reviewing the Complaint, the Court finds that there is no allegation that the
terms of the October 17, 2019 COA, which was attached to the Complaint as
Exhibit A, was breached. To be sure, the COA states that Shryne has the option,
“but not the obligation” to purchase shares. There is no allegation that Defendant
Shryne executed its option to purchase 100,000 shares of common stock of BCOK
as set for the to the Complaint and thereafter refused to pay the purchase
price as set forth in the agreement.

Plaintiff has offered Parol
evidence to rewrite the terms of this
agreement. Specifically, Plaintiff alleges that emails (Exhibit B to the
Complaint), indicate that the parties contemplated structuring the options agreement
so that Plaintiff would receive a convertible note that could be exchanged for preferred
shares in SGI at a 20 % discount. Plaintiff alleges that Defendants did not
“effectuate the Roll-Over at the Conversion Valuation” (Comp. ¶ 21), and therefore,
violated the terms of the COA. The parol
evidence rule “generally prohibits the introduction of any extrinsic evidence,
whether oral or written, to vary, alter or add to the terms of an integrated
written instrument. The rule does not, however, prohibit the introduction of
extrinsic evidence “to explain the meaning of a written contract ... [if] the
meaning urged is one to which the written contract terms are reasonably
susceptible.”” (Casa Herrera, Inc. v.
Beydoun (2004) 32 Cal.4th 336, 343.) Here, the contract includes an
integration clause. It states: “This Agreement constitutes the sole and entire agreement
of the Parties with respect to the subject matter contained herein, and
supersedes all prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter.” (Ex. A, pg. 2.) It is
clear to the Court that in this context, Plaintiff is offering Parol evidence “to
reconstruct the parties' contractual obligations” which is inappropriate. (Thomson
v. Canyon (2011) 198 Cal.App.4th 594, 608.)

Defendant argues that the second
cause of action fails because the alleged oral agreement, as argued above, was
not an enforceable contract.

Plaintiff argues the complaint
sufficiently states a claim for breach of good faith and fair dealing. The
complaint states that SGI intentionally “frustrated the purpose of the
contract” and did not comply with obligations. (Opp. 7: 3-5, Comp. ¶¶ 28-30.)

“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 Nat. Inc. (2000) 24
Cal.4th 317, 349.)

Because Plaintiff
has failed to establish that there was a breach of contract, this claim fails
as the alleged oral agreement was not enforceable.

Defendant argues that this cause
of action fails to state sufficient facts. First, this cause of action is timed
barred by the two-year statute of limitations, under CCP § 339. Second, the
complaint does not allege a clear and unambiguous promise, does not prove
reliance, does not demonstrate that reliance was reasonable, and does not
allege any injury based on that reliance.

Plaintiff argues that the complaint
sufficiently alleges promissory estoppel. In it, the complaint states that SGI
promised that Plaintiff’s shares of BCOK would be converted into SGI shares,
Plaintiff relied on this promise. Plaintiff also states that it would “amend
his Complaint to assert that he did not seek to sell his shares of BCOK because
of SGI’s promise to immediately convert his BCOK shares…” (Opp. 7: 15-19.)

“The elements of a promissory
estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2)
reliance by the party to whom the promise is made; (3) [the] reliance must be
both reasonable and foreseeable; and (4) the party asserting the estoppel must
be injured by his reliance.’” (Jones v.
Wachovia Bank (2014) 230 Cal.App.4th 935, 945).

After
a review of the complaint, the Court concludes that the Complaint fails to
allege sufficient facts for promissory estoppel. Specifically, in paragraph 40,
Plaintiff claims that Avidor condition the representations as “possibilities.”
Black’s Law provides one definition of possibility as “an event that may or may
not happen.” (POSSIBILITY, Black's Law Dictionary (11th ed. 2019).) The first
element of promissory estoppel is a promise “clear and unambiguous in its
terms.” Thus, these alleged promises were not definite enough. Additionally,
Plaintiff does not allege facts demonstrating how he relied on these alleged
promises and that such reliance was factually justifiable. Plaintiff simply
provides a conclusory allegation that Plaintiff justifiably relied on the
promises.

Defendant argues that the fourth
cause of action fails to state sufficient facts. Specifically, Defendant argues
that Plaintiff claims, which are based on “Avidor’s alleged false promise to
consummate the Roll-Over” fail as a “false promise to perform in the future…
does not support a claim for negligent misrepresentation.” (Motion 16: 14-19,
quoting Stockton Mortgage v. Tope (2014)
233 Cal.App.4th 437, 458.)

Defendant argues that cause of
action for intentional misrepresentation fails for various reasons. First,
there was no clear and definite promise since the states were “possibilities”
(Comp. ¶ 40.) Second, the complaint does not allege sufficient facts for the
element of defendant’s knowledge of falsity. Third, Plaintiff fails to allege
an intent to induce reliance. Lastly, similar to the arguments made concerning
promissory estoppel, Plaintiff does not allege reliance, reasonable reliance
and harm.

Plaintiff argues that this cause
of action, as well as the cause of action for intentional misrepresentation,
are satisfied because the complaint states that Defendant Avidor knew he was
misleading Plaintiff when he “solicited Plaintiff to agree to an
exchange/conversion of Plaintiff’s BCOK shares.” Additionally, the Complaint
alleges that Plaintiff was reasonable because the representations were
consistent with “written exchanges between the parties concerning Roll-Over.” (Opp.
8: 9-14.)

“The
elements of negligent misrepresentation are “(1) the misrepresentation of a
past or existing material fact, (2) without reasonable ground for believing it
to be true, (3) with intent to induce another's reliance on the fact
misrepresented, (4) justifiable reliance on the misrepresentation, and (5)
resulting damage.” (National Union Fire
Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc.
(2009) 171 Cal.App.4th 35, 50).

To
establish a claim for deceit based on intentional misrepresentation, the
plaintiff must prove seven essential elements: (1) the defendant represented to
the plaintiff that an important fact was true; (2) that representation was
false; (3) the defendant knew that the representation was false when the
defendant made it, or the defendant made the representation recklessly and
without regard for its truth; (4) the defendant intended that the plaintiff
rely on the representation; (5) the plaintiff reasonably relied on the
representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance
on the defendant's representation was a substantial factor in causing that harm
to the plaintiff.” (Manderville v.
PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498).

Claims for fraud must be pled with
particularity. (See Cooper v. Equity
General Insurance (1990) 219 Cal.App.3d 1252, 1262 [“in California,
every element of a cause of action for fraud must be alleged both factually and
specifically, and the policy of liberal construction of pleadings will not be
invoked to sustain a defective complaint”].) “[W]hen averments of fraud are
made, the circumstances constituting the alleged fraud must be specific enough
to give defendants notice of the particular misconduct so that they can defend
against the charge and not just deny that they have done anything wrong.” Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003)
(internal quotations and citations omitted). The allegations “must be
accompanied by ‘the who, what, when, where, and how’ of the misconduct
charged.” (Arikat v. JP Morgan Chase & Co. (N.D.
Cal. 2006) 430 F.Supp.2d 1013, 1022).

After a
review of the complaint, the Court finds that Plaintiff has failed to
sufficiently allege negligent misrepresentation. A false promise to perform a future
action, cannot support a claim for negligent
misrepresentation as a matter of law. (Stockton
Mortgage, Inc. v. Tope (2014) 233 Cal.App.4th 437, 458.) Here, the alleged
misrepresentations made in August 2019 were about a future deal, not a material
fact from the past. Thus, Plaintiff has failed to establish a cause of action
for negligent misrepresentation as a matter of law.

After a
review of the complaint, the Court finds that Plaintiff has failed to
sufficiently allege intentional misrepresentation. Specifically, the complaint
fails to sufficiently allege reasonable reliance. Plaintiff alleges that
Defendant made various misrepresentations about the Roll-Over in August 2019.
Yet, the Complaint indicates that Plaintiff received the COA in October and
took 6 days after opening it to sign it. Thus, from the complaint it illogical
that Plaintiff reasonably relied on the misrepresentations after he took 6 days
to review the COA, which contains information about whether there was an
immediate Roll-Over. (Ex. 2 within Exhibit A.) Based on the facts, Plaintiff was told various
times about the Roll-Over in August 2019 but then after reviewing the COA,
which did not contain any such provision about an immediate Roll-Over,
Plaintiff did not contact Defendant about this omission. Thus, Plaintiff has
failed to establish that he was justified in relying on the alleged statements
prior to signing the COA.

Motion for Judgment on the
Pleadings as to the 4^th and 5^th cause of action is
GRANTED.

Leave to amend should
be liberally granted if there is a reasonable possibility an amendment could
cure the defect. (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018,1035.)
The Plaintiff has the
burden of demonstrating that leave to amend should be granted, and that the
defects can be cured by amendment. (“Plaintiff must show in what manner he can
amend his complaint and how that amendment will change the legal effect of his
pleading.” Goodman v. Kennedy (1976)
18 Cal.3d 335, 349.) While leave to amend is usually liberally granted, it is
unlikely that Plaintiff will be able to cure the defects in the 1^st,
2^nd and 4th Causes of Action as set forth above. Specifically, the
parole evidence bars any extrinsic evidence, thus the alleged
misrepresentations in the emails are not admissible because of the integration
clause in the COA. Additionally, as a matter of law, Plaintiff is unable to allege
facts that would cure the negligent misrepresentation. However, as to the promissory
estoppel and intentional misrepresentation causes of action, as unlikely as it
may be that Plaintiff can sufficiently allege with precision certain facts such
as reasonable reliance, it may be that Plaintiff can cure the defects.

Motion for
Judgment on the Pleadings is GRANTED, as to all causes of action. Leave to
amend is GRANTED only as to the 3^rd and 5^th Causes of
Action. In all other respects, Leave to Amend is DENIED.

[1]
Plaintiff also states, in a footnote, that Court “needs to consider the
‘circumstances’ surrounding the COA, one of which is the friendship between
Plaintiff, Avidor, and Mitchell, and how that impacted execution of the COA.
This is incorrect. An MJOP is similar to a demurrer, and therefore, the Court
looks at the face of the complaint, any attachments to that complaint, and any
judicially noticed documents. The Court will not take into consideration
Plaintiff’s relationship with Defendants.