Judge: Virginia Keeny, Case: 22VECV01134, Date: 2022-12-13 Tentative Ruling
Case Number: 22VECV01134 Hearing Date: December 13, 2022 Dept: W
YOSEF COHEN,
et al. v. KAMBIZ KAMANGAR, et al.
Defendants WORLD TECH TOYS, INC.,
WORLD TRADING 23, INC. and KEVORK KOUYOUMJIAN’s demurrer to the complaint
Date of Hearing: December
13, 2022 Trial Date: None
set.
Department: W Case
No.: 22VECV01134
Moving Party: Defendants
World Tech Toys, Inc., World Trading 23, Inc. and Kevork Kouyoumjian
Responding Party: Plaintiffs
Yosef Cohen and Vahe Ter-Galstanyan
Meet and Confer: Yes.
(McKown Decl. ¶¶3-6.)
BACKGROUND
On August 9, 2022, Plaintiffs Yosef
Cohen and Vahe Ter-Galstyan filed a complaint against Defendants World Tech
Toys, Inc., World Trading 23, Inc., Kevork Kouyoumjian, Kambiz Kamangar, and
Kamir Distribution, LLC asserting causes of action for (1) Breach of Oral Joint
Venture Agreement; (2) Unlawful, Fraudulent & Unfair Business Practices; (3)
Breach of Fiduciary Duty; and (4) Fraud.
Plaintiffs allege Defendant Kamangar
made fraudulent representations to Plaintiff Cohen regarding a business
opportunity arising from the Pandemic. Plaintiffs allege Defendant Kamangar
represented to Plaintiff Cohen Defendant KOUYOUMJIAN had extensive contacts in
China as a result of his companies, World Trading 23, Inc. and World Tech Toys,
Inc., which were involved in importing goods from China for sale in the United
States and actively encouraged Plaintiff Cohen and Plaintiff Ter-Galstanyan to
order the gloves. Plaintiffs allege Defendants failed to perform in accordance
with the term so of the Agreement as well as their fiduciary duty.
[Tentative] Ruling
Defendants World Tech Toys, Inc., World Trading 23, Inc. and Kevork Kouyoumjian’s
Demurrer to the first, second, third, and fourth causes of action is SUSTAINED
WITH LEAVE TO AMEND.
DISCUSSION
Defendants World Tech Toys, Inc., World
Trading 23, Inc. and Kevork Kouyoumjian demur to the complaint on the grounds
the first, second, third, and fourth causes of action fail to state facts
sufficient to give rise to liability or constitute a cause of action against Defendants
and are uncertain.
First Cause of Action
Defendants demur to the first cause of
action for breach of oral joint venture agreement on the grounds (a) none of
the Moving Defendants are alleged to have agreed to enter into a joint venture
with Plaintiffs; (b) the elements for a joint venture are not sufficiently
plead; (c) conspiracy requires an underlying tort and thus, is inapplicable;
and (d) the only oral agreement alleged is between Plaintiff Cohen only and the
non-Moving Defendants. Further, Plaintiffs indiscriminately lump all of the “Defendants”,
including the Moving Defendants, into a single actor.
“A cause of action for breach of
contract requires (1) pleading of a contract, (2) plaintiff's performance or
excuse for failure to perform, (3) defendant's breach and (4) damage to
plaintiff resulting therefrom.” (McKell v. Washington Mutual, Inc.¿(2006)
142 Cal.App.4th 1457, 1489.) “Under California law, only a signatory to a
contract may be liable for any breach.” [Citations.]” (Clemens v. American
Warranty Corp. (1987) 193 Cal.App.3d 444, 452.)
To establish the existence of a joint
venture, the plaintiff must show (1) that the members have joint control over
the venture, (2) that members share the profits of the undertaking, and (3) the
members each have an ownership interest in the enterprise.” (Simmons v. Ware
(2013) 213 Cal.App.4th 1035, 1051-52.) The plaintiff must also show the
defendant in fact agreed to enter into the joint venture. (Bustamenta v.
Intuit, Inc. (2006) 141 Cal.App.4th 199, 211-13.)
Defendants argue fundamentally absent
from the complaint are any allegations that either of the Plaintiffs entered
into any agreement of any kind with any of the Moving Defendants. Plaintiffs
judicially admit that all of the communications that lead to any agreement to
purchase gloves were exclusively between Plaintiff Cohen and non-Moving
Defendant Kamangar.
In opposition, Plaintiffs argue entry
into an oral joint venture agreement can be done through a party's agent
because a person may do by ail agent any act that the person might do himself
or herself. (Civ. Code §§ 2304, 2305.) Accordingly, Plaintiffs’ allegations
Defendant Kamangar was acting as the ostensible agent of moving Defendants are
sufficient to make Defendants liable.
Upon review of the complaint, Plaintiffs
do not sufficiently allege that Defendant Kamangar was acting as each of the
Defendants’ agent in entering into the alleged oral joint venture agreement. “[T]he
significant test of an agency relationship is the principal’s right to control
the activities of the agent. It is not essential that the right of control be exercised
or that there be actual supervision of the work of the agent; the existence of
the right establishes the relationship.” (Violette v. Shoup (1993) 16
Cal.App.4th 611, 620.) Plaintiffs do not allege Moving Defendants had control
over Defendant Kamangar. Rather, Plaintiffs generally allege “each of the
Defendants was the agent and employee of each of their Co-Defendant.” (Compl.
¶21.) Taking the allegations as true, Plaintiffs have failed to admit an oral
agreement between Plaintiffs and Moving Defendants and has failed to allege
Defendant Kamangar was an agent of Defendants.
Defendants further ague Plaintiffs
admit that there was no sharing of profits or losses and Plaintiffs admit that
they had absolutely no control over any aspect of the purported joint venture. In
opposition, Plaintiffs argue Defendants’ argument ignores the law. “Although it
is usual to provide for an equal sharing of profits and losses, the parties may
agree to an unequal distribution of the profits, or they may agree that all the
parties shall participate in the profits and only certain of them in the
losses.” (Stilwell v. Trutanich (1960) 178 Cal.App.2d 614,619.) Moreover,
“where a joint venture involves the contribution of capital by one party and
services by the other, neither party is required to reimburse the other for
losses sustained.” (April Enterprises, Inc. v. KTTV (1983) 147
Cal.App.3d 805, 819.)
The court finds Plaintiffs have not
sufficiently alleged an agreement to share profits and losses. Plaintiffs
allege Plaintiffs entered into an
oral contract with Defendants for the purchase of the PPE gloves in exchange
for payment by Plaintiffs, at which point Defendants would sell them on behalf
of Plaintiffs who had pre-ordered such products at a higher price. (Compl.
¶61.) Plaintiffs have not alleged an understanding that the profits and losses
would be shared.
Moreover, Defendants argue they cannot
be liable for breach of an alleged oral joint venture agreement under a
conspiracy theory as a conspiracy requires the existence of an underlying tort.
(Everest Investors 8 v. Whitehall Real Estate Limited Partnership XI
(2002) 100 Cal.App.4th 1102, 1106.) The court finds the demurrer improper as a
demurrer does not lie to a portion of a cause of action. (PH II, Inc. v.
Superior Court (1995) 33 Cal.App.4th 1680, 1682.)
Lastly, the court agrees Plaintiffs
impermissibly lumps all Defendants together. It is unclear what representations
were made by who.
Accordingly, Defendants’ demurrer to
the first cause of action is SUSTAINED WITH LEAVE TO AMEND.
Third Cause of Action
Defendants demur to the third cause of
action for breach of fiduciary duty on the grounds (a) Plaintiffs have not
alleged facts demonstrating that a fiduciary duty existed between any of the
Moving Defendants and Plaintiffs because Plaintiffs have not adequately plead a
joint venture between Plaintiffs and any of the Moving Defendants; and (b) a
non-fiduciary cannot conspire with a fiduciary to commit a breach. Further, Plaintiffs
indiscriminately lump all of the “Defendants”, including the Moving Defendants,
into a single actor.
The elements for a breach of fiduciary
duty cause of action are “the existence of a fiduciary relationship, its
breach, and damage proximately caused by that breach.” (Thomson v. Canyon
(2011) 198 Cal.App.4th 594, 604.)
Defendants argue Plaintiffs have not
alleged any facts that, if true, demonstrate that each of the Moving Defendants
agreed to act as a fiduciary for Plaintiffs or that each of the Moving
Defendants entered into a relationship that imposed fiduciary obligations as a
matter of law. Specifically, Plaintiffs have not alleged that either of them
entered into a joint venture relationship with any of the Moving Defendants. Defendants
also argue the law is well-established that a non-fiduciary cannot conspire with
a fiduciary as a matter of law.
In opposition, Plaintiffs argue being a
member of a joint venture imposes fiduciary duties upon its members. (See,
e.g., Cleveland v. Johnson (2012) 209 Cal.App.4th 21 1315, 1339.) However,
as discussed above, Plaintiffs have failed to allege facts sufficient to
support a joint venture. As such, any theories of conspiracy fail.
Accordingly, Defendants’ demurrer to
the third cause of action is SUSTAINED WITH LEAVE TO AMEND.
Fourth Cause of Action
Defendants demur to the fourth cause of
action for fraud on the grounds (a) Plaintiffs allege no representations by,
and no fact supporting a claim against, any of the Moving Defendants; and (b)
the conspiracy allegations are not alleged with the requisite specificity as
required for a conspiracy to commit fraud is alleged, as it is here by
Plaintiffs. Further, Plaintiffs indiscriminately lump all of the “Defendants”,
including the Moving Defendants, into a single actor.
The elements of fraud are: “(a)
misrepresentation (false representation, concealment, or nondisclosure); (b)
knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce
reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v.
Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including
negligent misrepresentation, must be pled with specificity. (Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands
that a plaintiff plead facts which show how, when, where, to whom, and by what
means the representations were tendered.” (Cansino v. Bank of America
(2014) 224 Cal.App.4th 1462, 1469.)
Defendants argue Plaintiffs alleges no
misrepresentations by any of the Moving Defendants that they relied upon in
paying $700,000 for the gloves at issue, and no basis for asserting such a
claim against any of them. Defendants argue further fatal is that Plaintiffs do
not allege with specificity all of the required facts, including Defendants
conspired to commit fraud or that Defendants are alter egos.
In opposition, Plaintiffs again argue
the complaint alleges Defendant Kamangar was acting as an agent on behalf of
Moving Defendants. However, as stated above, the court finds Plaintiffs’ agency
allegations insufficient. Moreover, while the court finds most of the fraud
allegations specific enough to overcome a demurrer, Plaintiffs’ have indiscriminately
lumped all of the defendants together into a single actor making such
allegations impermissible. Further, the court agrees Plaintiffs’ alter ego
allegations are insufficient. Conclusory allegations that a corporation is an
alter ego of an individual is insufficient to justify the court in disregarding
the corporate entity in the absence of allegations of facts from which it
appears that justice cannot otherwise be accomplished. (Vasey v. Cal. Dance
Co. (1977) 70 Cal.App.3d 742, 749.) To succeed on a cause of action to
disregard the corporate form, the plaintiff must “…plead and prove such a unity
of interest and ownership that the separate personalities of the corporation
and the individuals do not exist, and that an inequity will result if the
corporate entity is treated as the sole actor.” (Id.)
Accordingly, Defendants’ demurrer to
the third cause of action is SUSTAINED WITH LEAVE TO AMEND.
Second Cause of Action
Defendants demur to the second cause of
action for unfair business practices (Bus. & Prof. Code §§17200 et seq.) on
the grounds (a) this claim is entirely derivative of Plaintiffs’ three other
claims and thus, for the same reason they fail, so too must this claim necessarily
fail; (b) Plaintiffs does not allege facts with reasonable particularity regarding
any of the Moving Defendants; and (c) Plaintiffs’ conspiracy claim lacks any factual
allegations, let alone are alleged with reasonable particularity as to each of
the Moving Defendants, that, if true, support a finding that any of the Moving
Defendants knew let alone agreed to the alleged conduct or later ratified such
conduct that forms the basis for Plaintiffs’ 17200 claim. Further, Plaintiffs
indiscriminately lump all of the “Defendants”, including the Moving Defendants,
into a single actor.
Defendants argue because a cause of
action for unfair business practices is derivative, Plaintiffs’ second cause of
action fails. Moreover, Plaintiffs do not plead the 17200 claim with reasonable particularity as
to any of the moving defendants. However, when a statutory claim fails, a
derivative UCL claim also fails. (Cel-Tech Communications, Inc. v. Los
Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 183.) A business
practice that might otherwise be considered unfair or deceptive cannot be the
basis of a section 17200 cause of action if the conduct has been deemed lawful.
(Ibid.)
Because Plaintiffs’ second cause of
action is derivative of Plaintiffs’ other claims, the court SUSTAINS the
demurrer to Plaintiffs’ second cause of action with leave to amend. Plaintiffs
have failed to sufficiently allege breach of oral joint venture, fraud and
breach of fiduciary duty.