Judge: Walter P. Schwarm, Case: 30-2019-01118995, Date: 2022-11-29 Tentative Ruling

Defendants’ (James Harnsberger; Taxsmart America Business Center, Inc.; Phoenix Rising Entertainment Group, Inc.; Innovative Tax & Wealth Strategies, Inc.; Universal Abundance Enterprises, LLC; Wealth and Tax Guru, Inc.; SMIB Management, Inc.; and ITWS Financial Services, Inc.) Motion for Summary Judgment or in the Alternative Summary Adjudication (Motion), filed on 7-7-22 under ROA 577, is GRANTED in part and DENIED in part as set forth below.

The court DENIES Defendant’s Request for Judicial Notice (RJN), filed on 7-7-22 under ROA No. 579, as immaterial to the court’s decision as set forth below. (Silverado Modjeska Recreation & Parks District v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.)

The court OVERRULES all of Defendants’ Evidentiary Objections filed on 11-1-22 under ROA No. 608.  The court notes that the objections do not comply with California Rules of Court, rule 3.1354 because they are not numbered.  Despite this lack of compliance, the court OVERRULES all of the objections.

Code of Civil Procedure section 437c, subdivision (p)(2) provides, “A defendant . . . has met his or her burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.  Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” 

Code of Civil Procedure section 437c, subdivision (f)(1), provides, in part, “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has not merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.  A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim of damages, or an issue of duty.” 

Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851, (Aguilar), states, “Second, and generally, the party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact. Although not expressly, the 1992 and 1993 amendments impliedly provide in this regard for a burden of production as opposed to a burden of persuasion. A burden of production entails only the presentation of ‘evidence.’ (Evid. Code, § 110.) A burden of persuasion, however, entails the ‘establish[ment]’ through such evidence of a ‘requisite degree of belief.’ (Id., § 115.) It would make little, if any, sense to allow for the shifting of a burden of persuasion. For if the moving party carries a burden of persuasion, the opposing party can do nothing other than concede. Further, although not expressly, the 1992 and 1993 amendments impliedly provide for a burden of production to make a prima facie showing.  A prima facie showing is one that is sufficient to support the position of the party in question. [Citation.]”  (Italics in Aguilar; Footnotes 13 and 14 omitted.) 

Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 838 (Binder) states, “Although summary judgment might no longer be considered a ‘disfavored’ procedure, [citation], the rule continues that the moving party's evidence must be strictly construed, while the opposing party's evidence must be liberally construed.” “On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues. [Citation.]” (Id., at p. 839.)

Cole v. Town of Los Gatos (2012) 205 Cal.App.4th 749, 756-757, provides, “The plaintiff can defeat a defense motion for summary judgment by showing either that the defense evidence itself permits conflicting inferences as to the existence of the specified fact, or by presenting additional evidence of its existence. [Citation.] The dispositive question in all cases is whether the evidence before the court, viewed as a whole, permits only a finding favorable to the defendant with respect to one or more necessary elements of the plaintiff's claims—that is, whether it negates an element of the claim ‘as a matter of law.’ [Citation.]”

The Notice for this Motion (Notice) seeks summary judgment/adjudication as to Plaintiffs’ (Solar Equity Group, LLC, SEG Project Management, LLC; Solar Equity Partners XVI, LLC, and SEG Capital V, LLC) Complaint, filed on 12-17-19 under ROA No. 2, based on the complete defense of unclean hands. (Notice; 2:1-21.)  The Notice also seeks summary adjudication as to the third fourth, and fifth causes of action. (Notice; 2:1-3:4.)

Issue No. 1—The Doctrine of Unclean Hands Provides a Complete Defense to SEG’s Entire Complaint:

The Motion states, “There is no doubt that Plaintiffs come to this Court with unclean hands. Kaiser, personally, profited from the enterprise in excess of $29 million. (SSUF No. 55.) Plaintiffs engaged in fraud by continuing to bring in investors while the IRS was rejecting the filings. Clearly, the scheme was questionable, since the IRS is currently investigating Kirkland, his entities and Kaiser and his entities including, REPM, in which Kaiser some of Kaiser’s entities have a membership interest. (SSUF No. 4-5.) [¶] Thus, the doctrine of unclean hands in this matter prevents Plaintiffs from enjoying the fruits of their transgressions and acts as a complete defense to their entire Complaint. As such summary judgment on the entire Complaint is warranted.” (Motion; 13:7-9.)  Plaintiffs’ Opposition to Defendants’ Motion for Summary Judgment or in the Alternative Summary Adjudication (Opposition), filed on 10-25-22 under ROA No. 591, responds, “First, the unclean hands doctrine fails as a matter of law since Harnsberger failed to meet the three-prong test for unclean hands and the undeniable evidence shows Harnsberger’s own hands are dirty. Indeed, far from being an arms-length tax, accountant, and financial adviser, Harnsberger and his companies actually made money from the tax structures they created through self-dealing.” (Opposition; 2:20-23.)

Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 56 (Fladeboe), states, “ ‘The [unclean hands] doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim. [Citation.]  The doctrine of unclean hands requires unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the matter in controversy. [Citations.] Unclean hands applies when it would be inequitable to provide the plaintiff any relief, and provides a complete defense to both legal and equitable causes of action. [Citations.]  ‘Whether the defense applies in particular circumstances depends on the analogous case law, the nature of the misconduct, and the relationship of the misconduct to the claimed injuries.’ [Citation.]” Mattco Forge, Inc. v. Arthur Young & Co. (1992) 5 Cal.App.4th 392, 407–408 (Mattco), provides, “As a general rule, application of the unclean hands doctrine remains primarily a question of fact. [Citation.]”

CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 641 (CrossTalk), explains, “Since the doctrine of unclean hands is heavily fact dependent, it is a uniquely poor candidate to support a demurrer. Nevertheless, there have been unusual situations in which a defense of unclean hands has been established solely by the allegations of the complaint. [Citation.] Blain recently examined the unclean hands doctrine in detail. The court recognized that ‘unclean hands’ is not one but rather a number of doctrines, each ‘dependent for their substance on the context of application.’ [Citation.] For example, the court quoted with approval the Restatement Second of Torts section 889: ‘ “One is not barred from recovery for an interference with his legally protected interests merely because at the time of the interference he was committing a tort or a crime  . . . .” ’ [Citation.] Regardless of whether a plaintiff was committing a tort or even a crime at the time his injury occurred, the question is the same: whether ‘ “ ‘under the circumstances there should be an application of that rule of equity which denies relief to one party against another when both have been engaged in a fraudulent transaction . . . .’ ” ’ [Citations.] Finding no bright line theory of application, the court stated: ‘We glean from this sparse product that whether there is a bar depends upon the analogous case law, the nature of the misconduct, and the relationship of the misconduct to the claimed injuries.’ [Citation.] At least one court has referred to this three prong analysis as ‘the Blain test.’ [Citation.]” (Italics in CrossTalk.)

Here, Defendants have not provided analogous case law that the doctrine of unclean hands automatically applies because Plaintiffs continued to bring in investors during an IRS investigation.  Further, assuming Defendants have met their initial burden of demonstrating that there is no material dispute of fact as to the application of the unclean hands doctrine, Plaintiffs’ evidence creates a triable issue of material fact as to the application of the unclean hands doctrine.   Plaintiffs have presented evidence that Plaintiffs relied on Defendants’ advice and recommendations in terms of Plaintiffs’ business model. (For example, Kaiser Decl. at ¶¶ 19, 22, 23, 25, 26, 27, 28, 29, 30, 31, 34, 35, 36, 37, 38, 44, 125, 126, 127, and Plaintiffs’ Separate Statement (PSS), filed on 10-25-22 under ROA No. 595, at PSS Nos. 29, 39, 44, and 46.) 

The declarations from James Harnsberger and Justin Kaiser create triable issues of material facts as to the application of the unclean hands doctrine.  Therefore, the court DENIES the Motion for Summary Adjudication at to Issue No. 1.

Issue No. 2—SEG Cannot Prevail on its Third Cause of Action for Professional Negligence because it Cannot Meet Two Essential Elements of its Claim:

Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137 (Giacometti), provides, “ ‘To state a cause of action for professional negligence, a party must show “(1) the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence.’ ” [Citation.]”

Defendants contend, “Not only does Kaiser admit that he has suffered no damages, but only anticipates future and speculative damages, he admits that real cause of the damages was the fact that there were never any solar equipment or solar projects to begin with. He also admitted that it is the investors and not him who were harmed by the enterprise, and not SEG.” (Motion; 15:20-23 (Italics in Motion.).)  Defendants also assert, “As the undisputed facts clearly indicate, the real cause of Kaiser’s (lack) of damages, was the fact that ‘Kirkland entities misrepresented the amount (sic) of solar installations as well as solar equipment that they actually had.’ (SSUF No. 64.) Even if Harnsberger provided tax advice, which the undisputed facts show he did not, what sparked the IRS investigations – both criminal and civil – was the discrepancies in the documentation that Kaiser, Kirkland, and Olsen provided and withheld from the IRS. (SSUF No. 63.)” (Motion; 17:4-9 (Italics in Motion.).)

The Opposition states, “The professional negligence damages are the result of SEG having paid Harnberger hundreds of thousands of dollars (Kaiser Dec. Ex. 59) for negligent services.  That money should be returned in full because SEG did not get what it paid for.” (Opposition; 12:15-17.)  Defendants Reply to Opposition to Summary Judgment or in the Alternative Summary Adjudication (Reply), filed on 11-1-22 under ROA No. 604, states, “The PSS states, “SEG suffered direct losses as a result of paying Harnsberger for negligently provided services or services that were not performed at all.” (PSS Nos. 58 and 59.)  The PSS also states, “The only ‘damages’ that Plaintiffs claim is the money they paid or is still owing to the Harnsberger Defendants. (Kaiser Dec. ¶¶ 130, 133-134, 149-150, 161-163, Exhibits 57-59 attached.) However, restitution of funds paid is not the measure of damages for Professional Negligence, Negligent Misrepresentation, or Breach of Contract.” (Reply; 4:25-28.)

Defendants’ Supplemental Brief (DSupp.), filed on 11-18-22 under ROA No. 612, states, “Here, SEG seeks damages for negligence and negligent misrepresentation. However, the only damages SEG seeks, and presented evidence of, are the fees it purportedly paid to the Harnsberger Defendants for the work they performed. These fees arise out of contract. Since no “special duty” exists, nor was such a duty even alleged, the contract for fees cannot be, as a matter of law, the damages that resulted from any purported negligence or negligent misrepresentation. In fact, as now claimed, the damages that SEG seeks violate the economic loss rule. [¶] Recently, our Supreme Court set forth the rule: “In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damages. (Sheen v. Wells Fargo Bank, N.A. (2002) 12 Cal.5th 905, 922) This is known as ‘the economic loss rule’ and is applied in cases to bar claims in negligence for pure economic losses in deference to a contract between litigating parties. (Ibid.)” (DSupp.; 3:5-15.)

Plaintiffs’ Supplemental Brief (PSupp.), filed on 11-18-22 under ROA No. 615), provides, “Here, as it relates to damages for Professional Negligence, Negligent Misrepresentation, and Breach of Contract, there are three triable issues of fact: 1) profits lost as a result of SEG effectively having to shut down its business due to Defendants’ bad advice (Kaiser Dec. ¶120), 2) the amounts paid to Defendants for faulty guidance, improper billing, and failure to perform (Kaiser Dec. ¶25-29, 125-127, 129-143, 146-153, 158-159, Ex. 47-53, 59) and 3) the criminal and civil liability befalling SEG as a direct result from Defendants’ negligence (Kaiser Dec. ¶57, 159.) Accordingly, the Motion should be denied.” (PSupp.; 1:25-2:3.)

Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 738 (Atkins), “A damage award must not be ‘ “ ‘speculative, remote, imaginary, contingent, or merely possible.’ ” ’ [Citations.]”

Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 515–516 (Applied), states, “Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectations of the parties are not recoverable. [Citations.] This limitation on available damages serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise. [¶] In contrast, tort damages are awarded to compensate the victim for injury suffered. [Citation.] ‘For the breach of an obligation not arising from contract, the measure of damages . . . is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.’ [Citation.]”

Herrington v. Superior Court (2003) 107 Cal.App.4th 1052, 1060 (Herrington), “Although neither Jordache nor Budd explicitly so states, we believe it is evident that an overpayment for services is contract damages. As we have already explained, were the law to be otherwise, tort damages would exist in every instance an attorney collected a fee. [¶] The trial court properly denied Orrick's motion for summary judgment, but for the wrong reason. Malcolm produced no evidence of cognizable tort damages. We do believe, however, that he produced sufficient evidence to proceed with his contract claims. [¶] Malcolm claims he did not get what he paid for, Orrick claims it is owed additional sums for the services it provided.” (Footnote 5 omitted.)

Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 929 (Sheen), states, “It is true that we have, in certain contexts, allowed tort actions to proceed even though they arise from, and are not independent of, a contract, despite the economic loss rule. Specifically, we have allowed for tort recovery in some cases involving insurance policies and contracts for professional services. [Citation.]” “Similar considerations distinguish this case from the recognized exception to the economic loss rule for consumers who contract for certain kinds of professional services. In that context, as in the insurance setting, a cause of action for negligence ensures that the consumer receives the services the professional agreed to provide. In such settings, professionals generally agree to provide ‘careful efforts’ in rendering contracted-for services, but ‘most clients do not know enough to protect themselves by inspecting the professional's work or by other independent means.’ [Citation.] Given this disparity, a claim for professional negligence can serve the important purpose of ensuring that professionals render the ‘careful efforts’ they have contracted to provide. [Citation.]” (Id., at p. 639.)

Here, Defendants have not shown the economic loss rule applies to Plaintiff’s claims based on Defendants’ negligence in providing professional services under Sheen.

Defendants, however, carried their burden of demonstrating that Plaintiffs’ damages from arising from harm to Plaintiffs’ investors are speculative because Plaintiffs are not in a position to recover damages on behalf of their investors, and at this time no investors have filed suit against Plaintiffs. (PSS Nos. 61 and 62.)  Plaintiffs’ evidence does not create a triable issue of material fact as to their damages arising from harm to their investors.

Defendants have also carried their burden of demonstrating that Plaintiffs’ damages resulting from the overpayment of fees are not recoverable as tort damages under Herrington. (PSS Nos. 58 and 59.)  Plaintiffs’ evidence does not create a triable issue of material fact as to their damages arising from the overpayment of fees as recoverable tort damages.

However, Plaintiff has demonstrated the existence of a triable issue as to Plaintiff’s lost profits caused by Defendants’ alleged faulty advice. The declaration of Justin Kaiser states, “As a result of Harnsberger’s bad advice and faulty tax credits structure, SEG business effectively had to be shut down and lost the ability to continue bringing in investors to grow the company. Had Harnsberger provided the correct information, SEG could have continued and thrived as a business.” (Kaiser Decl., ¶ 120.)  This declaration sufficiently demonstrates a triable issue of damages as to whether Plaintiffs’ business was harmed due to Defendants’ faulty advice. (See Kaiser Decl., ¶¶ 11, 16, 18, 22, 53, 55, 56, 62, 88, 92, 120.)  Therefore, the court DENIES the Motion for Summary Adjudication at to Issue No. 2.

Issue No. 3—SEG Cannot Prevail on its Fourth Cause of Action for Negligent Misrepresentation because It Cannot Meet an Essential Element of its Claim:

Borman v. Brown (2021) 59 Cal.App.5th 1048, 1060 (Borman), states, “ ‘The tort of negligent misrepresentation, [is] a species of the tort of deceit.’ [Citation.] ‘The elements of a 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.’ [Citation.] Negligent misrepresentation does not require knowledge of falsity . . . .’ [Citations.]”

Morgan v. Teed (2020) 48 Cal.App.5th 280, 289 (Morgan), states, “Under Civil Code section 1709, a defendant who willfully deceives a plaintiff with the intent to induce him to alter his position to his detriment ‘is liable for any damage which he thereby suffers.’ Civil Code section 3333, the general tort damage measure, provides that the ‘measure of damages . . . is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.’ ”

The Motion states, “Plaintiffs admitted that they have not suffered any damages as a result of the alleged negligent misrepresentation, but only anticipate future and speculative damages. Kaiser admits that real cause of the damages was the fact that there were never any solar equipment or solar projects to begin with. (See infra., Section C.1 and C.2.; SSUF Nos. 63-64.)” (Motion; 18:14-17.)  The PSS states, “SEG suffered direct losses as a result of paying Harnsberger for negligently provided services or services that were not performed at all.” (PSS Nos. 58 and 59.)

The Complaint pleads, “Harnsberger, the Harnsberger Defendants, and DOES 51-100 represented to Plaintiffs' management that important facts were true and/or failed to disclose important facts to Plaintiffs. This included, but was not necessarily limited to, representations and omissions that: (a) Harnsberger and the Harnsberger Defendants' professionals were expert tax advisors and/or experienced providing tax services for clients with net operating losses and solar tax credits who could and would adequately handle Plaintiffs' accounts, (b) Harnsberger, the Harnsberger Defendants, and DOES 51-100 were adequately and accurately handling Plaintiffs' tax planning, filings and disclosures, and (c) that concerns raised by third parties were ‘nothing to worry about,’ and that Plaintiffs had nothing to worry about; and (d) that Defendants were adequately handling and addressing Plaintiffs' tax matters, and that the underlying filings and disclosures for Plaintiffs had been properly handled. [¶] Harnsberger, the Harnsberger Defendants, and DOES 51-100's representations were not true, as illustrated by their failure to adequately plan for and/or advise Plaintiffs about the above-mentioned issues with solar projects, solar tax credits, and net operating loss reporting requirements.” (Complaint, ¶¶ 110 and 111.)

Based on the Kaiser declaration including paragraphs 11, 16, 18, and 141, Plaintiffs have demonstrated a triable issue of damages as to the fourth cause of action because the professional fees Plaintiffs paid to Defendants based on misrepresentations as to Defendants’ qualifications and the viability of Plaintiffs’ business are recoverable damages under a theory of negligent misrepresentation. (Civ. Code, § 3333.) Additionally, the Kaiser declaration sufficiently demonstrates a triable issue of damages as to whether Plaintiff’s business was harmed due to Defendants’ misrepresentations. (Kaiser Decl., ¶¶ 11, 16, 18, 22, 53, 55, 56, 62, 88, 92, 120.)

The Motion also states, “. . . Plaintiffs cannot show reasonable reliance.” (Motion; 18:21.)  Plaintiffs’ evidence sufficiently demonstrates a triable issue of material fact as to whether Plaintiffs’ reasonably relied on Defendants’ alleged misrepresentations. (For example, see Kaiser Decl. at ¶¶ 16, 18, 27, and 141.)

Therefore, the court DENIES the Motion for Summary Adjudication at to Issue No. 3.

Issue No. 4—SEG Cannot Prove that Innovative Tax & Wealth Strategies, Inc., Universal Abundance Enterprises, LLC, Wealth and Tax Guru, Inc. (‘WTC’), SMIB Management, Inc., and Phoenix Rising Entertainment Group breached the alleged contract as none of those entities were parties to the Engagement Letter, the alleged contract.

The Motion states, “To begin, the Fifth Cause of Action is alleged against Harnsberger and all the Harnsberger Defendants. (SSUF No. 33.) However, it is undisputed that the Engagement Letter was between SEG, et al. and Defendant TSABC, a corporation set up by Harnsberger to handle SEG’s delinquent tax issues. (SSUF No. 33.) Since they are not parties to the Engagement Letter, which is the alleged contract, summary adjudication as to Harnsberger and his other entities must be granted on this cause of action.” (Motion; 19:27-20:4.)

Paragraph 117 of the Complaint, pleads, “Harnsberger, the Harnsberger Defendants, and DOES 51-100 agreed to perform a number of services for Plaintiffs, as referenced in the Engagement Letter contract by and between the Parties dated July 20, 2018. The services were also discussed verbally by and among the Parties and reinforced in other documents including, but not limited to, advisement memorandums dated May 20, 2018, July 20, 2018, and July 16, 2018.”

Paragraph 19 of the declaration from James Harnsberger states, “Around July 6, 2018, SEG engaged me by letter agreement (‘Engagement Letter’) to identify and develop ‘a comprehensive filing strategy and filing plan for the delinquent tax returns for the tax year(s) 2016 and 2017 for identified LLC’s and to provide interim client support on demand SOD model of professional support and a comprehensive detailed support.’ A true and correct copy of the Engagement Letter is attached hereto as Exhibit ‘F.’ ”  Page 5 of the Engagement Letter states in part, “This Letter of Engagement shall be between the (SEG, et al) and (Tax Smart America Business Center, Inc) . . . .” (Harnsberger Decl., ¶ 19 and Exhibit F.)  The copy of the Engagement Letter provided by Defendants is not signed. (Harnsberger Decl., ¶ 19 and Exhibit F.)

Paragraph 161 of the Kaiser declaration states, “Attached hereto as Exhibit 57 is a true and correct copy of the engagement letter signed by James Harnsberger describing the services he would provide. He failed to provide those services.”  Page 5 of the Engagement Letter provided by Plaintiffs shows that James Harnsberger signed it under the heading “FIRM” and that Justin Kaiser signed it under the heading “CLIENT”  as “CEO of Solar Equity Group.” (Kaiser Decl., ¶ 161 and Exhibit 57.)

Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98, “To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff's performance or excuse for nonperformance, (3) the defendant's breach, and (4) resulting damages to the plaintiff. [Citations.]” 

Here, the parties do not appear to dispute that Plaintiffs entered into a contract with Tax Smart America Business Center, Inc. (TSABC) by way of the Engagement Letter.  Plaintiffs’ evidence, however, does not create a triable issue of material fact as to whether Plaintiffs entered into a contract with the remaining Defendants.  From the Engagement Letter, it is clear that Mr. Harnsberger signed it on behalf of TSABC.  The Engagement Letter specifically refers to TSABC.  The Engagement Letter does not refer to the other Defendants.  The breach of contract cause of action is not viable against the Defendant who are not parties to the Engagement Letter.  Since TSABC is not a party identified in Issue No. 4., the court GRANTS the Motion for Summary Adjudication as to Issue No. 4.

Issue No. 5—SEG Cannot Prove that TaxSmart America Business Center Breached its Contract or that the Alleged Breach was the Actual Cause of any of SEG’s Damages:

Here, Plaintiffs’ evidence creates a triable issue of material fact as to breach. (Kaiser Decl., ¶ 161 and Exhibit 57.)  Plaintiffs’ evidence also demonstrateshe existence of a triable issue as to Plaintiffs’ damages caused by Defendants’ alleged breach. (Kaiser Decl., ¶ 163 and Exhibit 59.)  Therefore, the court DENIES the Motion for Summary Adjudication as to Issue No. 5.

In summary, the court DENIES Defendants’ (James Harnsberger; Taxsmart America Business Center, Inc.; Phoenix Rising Entertainment Group, Inc.; Innovative Tax & Wealth Strategies, Inc.; Universal Abundance Enterprises, LLC; Wealth and Tax Guru, Inc.; SMIB Management, Inc.; and ITWS Financial Services, Inc.) Motion for Summary Judgment or in the Alternative Summary Adjudication, filed on 7-7-22 under ROA 577, as to Issue Nos. 1, 2, 3, and 5.  The court GRANTS the Motion as to Issue No. 4. Based on the court’s resolution of Issues Nos. 1, 2, 3, 4, and 5, the court DENIES the Motion for Summary Judgment.

Plaintiffs are to give notice.