Judge: William D. Claster, Case: 19-01115265, Date: 2022-12-09 Tentative Ruling
Defendant Thomas Wylde, LLC's Notice of Demurrer and Demurrer to Plaintiffs' Second Amended Complaint ROA 541
Defendants Thomas Wylde, LLC (“TW”) demurs to the sole remaining cause of action in the second amended complaint (2AC) of Plaintiffs PDTW, LLC and Paula Thomas: the 20th, for fraudulent concealment. For the reasons set forth below, TW’s demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.
Both sides’ requests for judicial notice are GRANTED.
At the hearing, Plaintiffs should be prepared to discuss the status of John Hanna, Doug Lee and Roger Kuo, who are named as defendants on the 20th cause of action but do not appear ever to have been served with process.
I. Factual Background
The Court assumes the parties’ familiarity with the general factual background of this case, which has been discussed at length in rulings from both this Court and the Court of Appeal.
As alleged in the 2AC, the 20th cause of action is based on discovery responses served by TW in a prior lawsuit, Thomas v. Thomas Wylde, LLC, LASC No. BC596495 (the “Original Action”). In the Original Action, Thomas served discovery requests that sought information about the existence of any insurance policies for TW. On February 26, 2016, TW served responses denying that any such policies existed. Believing these responses were true and that TW had no applicable insurance policies, Thomas dismissed the Original Action on April 5, 2018. (2AC ¶¶ 20-21, 28.)
According to the 2AC, these denials turned out to be false: “It was later discovered in 2018 that the business records of TW clearly indicate that TW did in fact have substantial insurance that covered mismanagement and wrongful discharge during the relevant time period.” (2AC ¶ 21.) PDTW and Thomas now bring a claim for fraudulent concealment. They allege TW, at the direction of defendants John Hanna, Doug Lee, and Roger Kuo, as well as former defendant Jene Park, intentionally concealed the existence of the policies in discovery responses in order to (1) prevent PDTW and Thomas from making claims on the policies, and (2) induce Thomas to abandon the Original Action.
II. Standard of Review
In reviewing the sufficiency of a complaint against a demurrer for failure to state facts sufficient to state a cause of action, the Court is guided by long-settled rules. The Court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “The complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “Further, [the Court] gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)
III. PDTW’s Claim
TW argues PDTW’s claim is judicially estopped due to PDTW’s failure to schedule the claim in its bankruptcy proceedings. The Court agrees.
As the Court of Appeal explained in PDTW, LLC v. Kring & Chung, LLP (2022) 2022 WL 1744790 at *5-*7, bankruptcy debtors have an affirmative duty to file a schedule of all assets and liabilities under penalty of perjury. This duty continues for the duration of the bankruptcy proceeding. Failure to disclose assets to the bankruptcy court can later bar the debtor from pursuing those claims under the doctrine of judicial estoppel. (The Court cites the Court of Appeal’s discussion of bankruptcy and judicial estoppel inasmuch as it is law of the case. See CRC 8.1115(b)(1).)
A. Whether PDTW Scheduled This Claim
Plaintiffs argue PDTW in fact scheduled this claim in bankruptcy, meaning judicial estoppel does not apply. The Court disagrees.
In part 11 of the schedules, a debtor is to list “All other assets.” The form asks: “Does the debtor own any other assets that have not been reported on this form?” If the answer is “Yes,” the debtor is directed to “Fill in the information below.” (TW RJN, Ex. B, at p. 00014.) Line 73 in “All other assets” is “Interests in insurance policies or annuities.” In both the original and amended schedules (TW RJN, Exs. B-C), PDTW did not fill in any information relating to interests in insurance policies. As a result, no interests in insurance policies were identified.
Line 74 in “All other assets” is “Causes of action against third parties (whether or not a lawsuit has been filed).” Here, PDTW identifies the Original Action. But in describing the nature of the claims in its original and amended schedules, PDTW listed “Conversion, Trespass to Chattels, Constructive Trust, Preliminary & Decl Relief.” It did not list fraud, concealment, etc., let alone fraud specifically relating to concealment of insurance policies.
As a result, PDTW failed to schedule the claim it now brings.
B. Awareness of Claims
Plaintiffs next argue the insurance-based claim was concealed, meaning PDTW was unaware of it and thus couldn’t have scheduled it. The allegations of the complaint show otherwise.
Plaintiffs discovered at some point in 2018 that TW had concealed the existence of the insurance policies. (2AC ¶ 21 [“It was later discovered in 2018 that the business records of TW clearly indicate that TW did in fact have substantial insurance that covered mismanagement and wrongful discharge during the relevant time period.”].) The Original Action was dismissed, based on the false denial of insurance, on April 5, 2018. (2AC ¶ 28.) Interpreting “discovered in 2018” as broadly as possible, Plaintiffs knew of the potential claim by no later than December 31, 2018. Again, federal law imposed on PDTW a continuing duty to update its schedules. It never did so.
C. Conclusion on Judicial Estoppel
PDTW failed to schedule its fraudulent concealment claim in bankruptcy, even though it knew of this claim no later than December 31, 2018. By May, 2019 when the bankruptcy court approved the settlement that released PDTW’s litigation rights to Thomas, PDTW had known of the claim for at least five months. (TW RJN, Ex. E.) The bankruptcy continued for nearly another two years, ending with PDTW’s discharge in February 2021. (TW RJN, Ex. G.)
For the reasons set forth in the Court of Appeal’s opinions in this matter, PDTW’s claims are barred by judicial estoppel.
IV. Thomas’s Claim
In support of its demurrer to Thomas’s claim, TW refers the Court to Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, which held there was no separate cause of action for spoliation of evidence “when the alleged intentional spoliation is committed by a party to the underlying cause of action to which the evidence is relevant and when the spoliation is or reasonably should have been discovered before the conclusion of the underlying litigation.” (Id., at p. 4.) Because Cedars-Sinai concerns spoliation of evidence rather than false discovery responses, it isn’t directly on point. But TW specifically refers the Court to Cedars-Sinai’s discussion of the history of tort litigation based on prior litigation misconduct, with particular focus on tort claims based on perjury. (See id. at pp. 7-13 (cited at Memo. p. 18).)
Upon review of this discussion, and the cases cited therein, the Court is particularly persuaded by the decision in Agnew v. Parks (1952) 172 Cal.App.2d 756. In Agnew, a court-appointed disinterested expert in an underlying medical malpractice case falsely testified he didn’t know the defendant physician, then opined the physician hadn’t acted negligently. Upon learning the expert and the defendant physician had been coworkers in the past, the plaintiff sued the expert, the defendant physician, and the defendant physician’s attorneys for conspiracy to obstruct justice, among other claims. The gravamen of the conspiracy claim was that all parties had conspired to put on false testimony for benefit of the defendant physician.
The trial court sustained the defendants’ demurrer to the conspiracy claim without leave to amend, and the Court of Appeal affirmed. It wrote, “aside from defamation and malicious prosecution, no injury from false testimony upon which a civil action for damages can be maintained is recognized.” (Id., at p. 765.)
The rule of Agnew is directly applicable here. Thomas’s claim is for fraudulent concealment based on TW’s false discovery responses in the Original Action. Because no claim for fraudulent concealment based on false testimony is recognized, the demurrer is sustained.
V. Leave to Amend
This is Plaintiffs’ third attempt to plead claims against TW. The Court does not see how PDTW can avoid judicial estoppel, nor how Thomas can plead a claim based on false discovery responses that avoids the rule of Agnew. For these reasons, leave to amend is denied.