Judge William D. Claster, Case 21-01205066 2022-09-16 Tentative Ruling

Judge: William D. Claster, Case: 21-01205066, Date: 2022-09-16 Tentative Ruling

1. Cross-Defendants ECOMMERCE SAAS LLC, 488 CLUB LLC and OFI SAAS LLC'S Demurrer to JD Equity Holdings LLC's First Amended Cross-Complaint ROA 133

2. Cross-Defendants ECOMMERCE SAAS LLC, 488 CLUB LLC AND OFI SAAS LLC'S Notice of Motion and Motion to Strike Darnell Ponder as a Defendant and the Tenth Cause of Action ROA 129

Cross-Defendants Ecommerce SAAS LLC, 448 Club LLC, and OFI SAAS LLC’s Demurrer to First Amended Cross-Complaint

Cross-Defendants Ecommerce SAAS LLC, 448 Club LLC, and OFI SAAS LLC demur to portions of the First Amended Cross-Complaint (“FAXC”) of Defendants/Cross-Complainants JD Equity Holdings LLC and Jacob Daniels. The Court rules as follows:

1. The demurrer is SUSTAINED based on defect/ misjoinder of parties per CCP § 430.10(d) by virtue of adding Darnell Ponder as a cross-defendant and the 10^th cause of action for constructive trust without leave of court.

2. The demurrer is OVERRULED as to alter ego liability.

In evaluating a demurrer, 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.)

On 02-23-22, the Court sustained Cross-Defendants’ demurrer to the original cross-complaint with 15 days leave to amend, ruling as follows (ROA 96):

“Although the causes of action generally allege that all ‘Cross-Defendants’ took all actions, the specific allegations of the Cross-Complaint and the Opposition make clear that any liability against Ecommerce SAAS LLC (dba Tangram), OFI SAAS LLC, and 488 Club LLC (collectively, the ‘Alter Ego Cross-Defendants’) is based solely on alter ego liability.

…

In this case, the court finds the Cross-Complaint does not adequately or sufficiently allege facts to support unity of ownership. Cross-Defendant EC is owned by Darnell Ponder and Khaazra Maaranu (Cross-Compl. 5:17-25.) The court observes Cross-Defendant 488 Club LLC is owned by Darnell Ponder, Jon Lakatos and Michael Carnevale (Id at 26:5-7.) Cross Defendants Tangram and OFI SAAS are owned by 488 Marque Trust (Id. at 26:8-10, 27:11-18.) Therefore, based on the state of the record, as applied to the applicable law, the court concludes Cross-Complainants JD Equity Holdings LLC and Jacob Daniels have failed to allege sufficient facts to properly allege the Cross-Complaint.”

On 03-10-22, JD Equity Holdings and Jacob Daniels filed the FAXC. (ROA 105.) In addition to the nine causes of action previously alleged, a tenth cause of action for constructive trust was added. Additionally, Defendants added Darnell Ponder as a Defendant.

1. Defect or Misjoinder of Parties

As a general rule, amendment of a pleading is governed by CCP § 473 and CRC 3.1324(a)-(b).) CCP § 430.10(d) provides that a demurrer lies for defect or misjoinder of parties.

A. New Party

Following sustaining of the first demurrer, Cross-Complainants did not seek leave to add Darnell Ponder as a Cross-Defendant. Likewise, the Court's order sustaining the demurrer with leave to amend did not expressly grant leave to add new parties. (ROA 96.)

Cross-Complainants seek to avoid the requirement of obtaining leave of court by asserting that “the addition of Ponder directly addressed the court’s concerns by identifying the parties responsible for the wrongs committed, and the engineer and beneficiary of the money laundering scheme.” (Opp. at 6.) This statement does not accurately characterize the Court’s order. Indeed, Ponder was already “identif[ied]” in the Cross-Complaint (ROA 41) as a wrongdoer. (See, e.g., ¶¶ 14, 39, 56).

None of the cases cited by Cross-Complainants supports their position. Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023, held that when leave to amend is granted after sustaining a demurrer, the scope of permissible amendment is limited to the causes of action to which the demurrer has been sustained; adding a new cause of action without leave is improper. (Id.) Harris did not concern the addition of parties and there is no cited authority supporting the assertion that claims and parties are interchangeable. As to Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939 and Mabie v. Hayatt (1998) 61 Cal. App. 4th 581, 596, neither case concerns amendment after a demurrer is sustained. More to the point, People ex rel. Dept. Pub. Wks. v. Clausen (1967) 248 Cal.App.2d 770, 785 held that leave to amend a complaint following demurrer does not constitute leave to amend to add a new defendant.

B. New Cause of Action

As with the addition of the new party, Cross-Complainants have not sought leave under CCP § 473 to add the Tenth Cause of Action (Constructive Trust).

Following an order sustaining a demurrer with leave to amend, a plaintiff may amend the complaint only as authorized by the court’s order—a plaintiff may not add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023 [new cause of action after demurrer improper]; Zakk v. Diesel (2019) 33 Cal.App.5th 431, 456 [“granting of leave to amend after a demurrer is sustained on one ground does not give the plaintiff a license to add any possible cause of action that might not be subject to dismissal on that ground”].)

An exception for a new cause of action within the scope of the order granting leave to amend applies where the new cause of action “directly responds” to the court's reason for sustaining the earlier demurrer. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 [where trial court found plaintiff failed to allege she had standing and new declaratory relief COA supported her standing claim, trial court should have permitted the new COA to establish standing.].) That exception does not apply here as the 10th COA is not within the scope of the order granting leave to amend, which concerned the failure to allege unity of ownership.

2. Alter Ego Liability

“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exists. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538).

“Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other.” (Id. at 538-539). “Other factors which have been described in the case law include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers.” (Id.)

As explained by the court in Leek v. Cooper (2011) 194 Cal.App.4th 399, a plaintiff “must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.” (Id. at 415). Moreover, “[t]he allegation that a corporation is the alter ego of the individual stockholders 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.” (Meadows v. Emett & Chandler (1950) 99 Cal.App.2d 496, 498-499).

However, as noted by the Court in Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, a plaintiff need only plead “ultimate rather than evidentiary facts,” to support alter ego liability. (Id. at 236). “Moreover, ‘less particularity [of pleading] is required where the defendant may be assumed to possess knowledge of the facts at least equal, if not superior, to that possessed by the plaintiff,’ which certainly is the case here.” (Id.; accord Greenspan v. Ladt, LLC (2010) 185 Cal.App.4th 1413, 1445 [“Courts have followed a liberal policy of applying the alter ego doctrine where the equities and justice of the situation appear to call for it rather than restricting it to the technical niceties depending upon pleading and procedure.”].)

Here, Cross-Complainants allege that Cross-Defendant EC is co-owned by Darnell Ponder and Khaazra Maaranu. (¶ 15.) Cross-Defendant 488 Club LLC is owned by Darnell Ponder, Jon Lakatos, and Michael Carnevale. (¶ 145.) Cross-Defendants Tangram and OFI SAAS are owned by 488 Marque Trust. (¶ 146.) All of these allegations were made previously.

Cross-Complainants now add the following allegations:

On information and belief, Mr. Ponder, Mr. Lakatos, Mr. Carnevale, Electronic Commerce LLC, Ecommerce SAAS LLC, OFI SAAS LLC, and 488 Club LLC share a unity of interest because they involve the same or similar owners and officers, and have apparent control of all of the entity cross-defendants.

Indeed, the individuals named above, the registered agent of the entity Cross-Defendants identified as Walter Melton, and a mysterious ‘488 Marque Trust’ serve as the threads that unite the interests of all parties. (¶ 143.)

On information and belief, 488 Club LLC owns, controls, or is the beneficiary of, 488 Marque Trust”, which means Darnell Ponder, Jon Lakatos, and Michael Carnevale “through 488 Club LLC, control and/or own 488 Marque Trust. (¶¶ 147-48.)

These allegations regarding the 488 Marque Trust are contained in a new section entitled “Alter Egos’ Unity of Interest.” (See ¶¶ 143-183.)

While Cross-Defendants challenge the allegations as conclusory since they are based on the “information and belief,” they cite no authority for the proposition that pleading on this basis renders the allegations inadequate. In short, these new allegations, along with previous allegations that Ecommerce SAAS LLC and Electronic Commerce share the same office space, officers, and employees, and that both are engaged in the business of providing payment processing services and controlled by Ponder (e.g., ¶¶ 149, 159, 163, 178), are sufficient to support claims of alter ego liability. (Sonora Diamond Corp. v. Superior Court, supra at 538-39.).

Cross-Defendants Ecommerce SAAS LLC, 448 Club LLC, and OFI SAAS LLC’s Motion to Strike Portions of the First Amended Cross-Complaint

A court may strike out any irrelevant, false, or improper matter inserted in any pleading or strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule or an order of the court. (Code Civ. Proc. § 436.) Based on the above rulings, the motion to strike Paragraphs 9 adding Ponder as a cross-defendant and Paragraphs 262-267 adding the 10th cause of action is MOOT.