2009-00055591-CU-BT

The TDS Group Inc vs. The IRA Center

Nature of Proceeding: Hearing on Demurrer (Pension Planners/Cetera Advisors)

Filed By: Carlucci, Thomas F.

*** If oral argument is requested, the parties must at the time oral argument is
requested notify the clerk and opposing counsel of the causes of action that will
be addressed at the hearing. Counsel are also reminded that pursuant to local
court rules, only limited oral argument is permitted on law and motion matters.
***

Defendants Cetera Advisors Networks, LLC (“Cetera”), Pension Planners Security, Inc.
(“PPSI”), Gina Duryea, Bar Financial, LLC (“BAR”), Anthony Tarantino, John Brackett,
and Erick Huck’s (collectively “Defendants”) joint demurrer against Plaintiff TDS Group,
Inc.’s (“TDS”) Sixth Amended Complaint (“SAC”) is ruled upon as follows.

Both parties’ requests for judicial notice are granted. In taking judicial notice of these
documents, the court accepts the fact of their existence, not the truth of their contents.
th
(See Professional Engineers v. Dep’t of Transp. (1997) 15 Cal.4 543, 590 [judicial
notice of findings of fact does not mean that those findings of fact are true]; Steed v.
Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121.)

This action commenced in 2009 with a complaint by plaintiff TDS, whose former
principals are Messrs. Holt and Wickers. TDS acted as a 403(b)/457 deferred
compensation plan administrator for public school districts and other related entities.
TDS entered into agreements with various entities and individuals to act as TDS’
representatives. These representatives were then licensed to use TDS’
trademarks, trade name, logos, and service mark. TDS alleges that PPSI was TDS’
licensed broker until it was purchased directly by BAR, and indirectly by Cetera, in
2008. The individual defendants are either part owners or employees/agents of BAR.

Defendants demurrer to the following causes of action: Intentional Misrepresentation
(COA 3), Concealment (COA 4), Intentional Interference with Prospective Economic
Advantage (COA 5), and Negligent Interference with Prospective Economic Advantage
(COA 6). Statute of Limitations: Fraud Based Causes of Action

Defendants demur to the Intentional Misrepresentation and Concealment causes of
action the grounds that they are barred by the applicable three year statute of
limitations for fraud. (CCP §338(d).) The Court notes that TDS first alleged these
fraud based causes of action in its fifth amended complaint, which was filed on
January 10, 2014. TDS’ initial complaint was filed on August 17, 2009.

The SAC alleges the following. On July 1, 2008, defendant Duryea sent an email to all
TDS Representatives and then to the principals of TDS, Doug Holt and Al Wickers,
informing them that their payouts would not change. (SAC ¶29.) It further alleges that
at a junket in Lake Tahoe in October 2008, defendant Brackett told the TDS
representatives and Al Wickers that they were not going to address payout for one
year. (Id. ¶30.) It alleges that at various times prior to June 2009, Defendants directed
and instructed TDS Representatives to pay no override/payouts to Al Wickers which
led to the total elimination of override payments to Al Wickers. (Id. ¶ 17.)

Defendants argue that three year statute of limitations began to run in June 2009 when
Mr. Wicker’s override payments were completely eliminated. Thus, the filing of the fifth
amended complaint on January 10, 2014 was beyond the three year statute of
limitations.

In opposition to the motion, TDS argues that these causes of action are not barred as
it has alleged the delayed discovery rule. The SAC alleges that TDS was unaware of
the misrepresented and concealed facts until a confidential email was produced on
July 23, 2013 and until Brackett’s deposition testimony on July 30, 2013. TDS
contends that it did not discover Defendants’ “present intent in July through October
2008 to not maintain the percentage of GDC payout” until the email was produced in
July 2013. (Opposition, 3:3-6.)

The demurrer is OVERRULED. The Court recognizes that there is an issue regarding
whether Plaintiff was reasonably diligent in investigating the claim. However, this is a
factual issue that cannot be resolved on demurrer. The Court does not disagree that
TDS will have to prove reasonable diligence at a later stage.

Intentional and Negligent Interference with Prospective Economic Advantage

The demurrer is OVERRULED. Defendants argue that the SAC fails to sufficiently
allege any conduct which was “wrongful” separate and apart from the interference
itself. Here, the Court has sustained Defendants’ demurrer to the fraud based claims
on which these causes of action are predicated.

TDS argues that these causes of action are properly pled because the independently
wrongful act need not be towards TDS. TDS relies on Crown Imports, LLC v. Superior
Court (2014) 223 Cal.App.4th 1395 for the proposition that the independent wrong
need not be independently wrongful as to the plaintiff. In Crown, the court
acknowledged that:

the alleged interference must have been wrongful by some measure
beyond the fact of the interference itself. (Della Penna v. Toyota Motor
Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392-393 [45 Cal. Rptr. 2d 436,
902 P.2d 740].) For an act to be sufficiently independently wrongful, it
must be “unlawful, that is, … it is proscribed by some constitutional,
statutory, regulatory, common law, or other determinable legal
standard.” (Korea Supply Co. v. Lockheed Martin Corp., supra, 29
Cal.4th at p. 1159.)

(Crown Imports, LLC, supra, at 1404.)

The court further explained that:

There is “no sound reason for requiring that a defendant’s wrongful
actions must be directed towards the plaintiff seeking to recover for this
tort. The interfering party is liable to the interfered-with party [even] ‘when
the independently tortious means the interfering party uses are
independently tortious only as to a third party.’

(Id. at 1405.) The Crown court provided an example of such a situation – “if companies
A and B are competing for a piece of lucrative business and A uses violence against
the employees of B to prevail, B could sue A for intentional interference with
prospective economic advantage, based on the battery committed against its
employees.” (Id.) Here, TDS allege that Defendants’ committed independently
tortious acts against a third party. Specifically, TDS alleges that Defendants
intentionally disrupted the Franchise Agreements, Common Remitter Contracts and
TPA Contracts. (SAC, para. 17.) Defendants forced Wickers to resign his
commission, strong-armed Security Benefits, Group, Inc. (“SBG”) by threatening SBG
with removal of all of Cetera’s business from SBG. (Id.) Defendants applied pressure
to TDS’ Representatives and prevented them from working with TDS. (Id.)

At this stage of the proceedings, these allegations are sufficient.

Defendants shall file an answer to the remaining causes of action by no later than
March 24, 2014.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.

2009-00055591-CU-BT

The TDS Group Inc vs. The IRA Center

Nature of Proceeding: Motion to Strike (Pension Planners/Cetera Advisors)

Filed By: Carlucci, Thomas F.

Defendants Cetera Advisors Networks, LLC (“Cetera”), Pension Planners Security, Inc.
(“PPSI”), Gina Duryea, Bar Financial, LLC (“BAR”), Anthony Tarantino, John Brackett,
and Erick Huck’s (collectively “Defendants”) joint motion to strike portions of Plaintiff
TDS Group, Inc.’s (“TDS”) Sixth Amended Complaint (“SAC”) is DENIED.

Defendants move to strike the punitive damages allegations on the grounds that they
are unsupported by factual allegations to support malice, oppression, or fraud. The motion is DENIED. The Court has overruled Defendants’ demurrer to the fraud based
causes of action. Moreover, TDS alleges that Defendants intentionally disrupted the
Franchise Agreements, Common Remitter Contracts and TPA Contracts. (SAC, para.
17.) Defendants forced Wickers to resign his commission, strong-armed Security
Benefits, Group, Inc. (“SBG”) by threatening SBG with removal of all of Cetera’s
business from SBG. (Id.) Defendants applied pressure to TDS’ Representatives and
prevented them from working with TDS. (Id.)

At this stage of the proceedings, these allegations are sufficient.

Moreover, the motion is DENIED as to those “fraud” allegations which Defendants
contend are barred by the statute of limitations. These allegations, however, appear to
be relevant to provide foundation to support Plaintiffs’ claim for punitive damages,
rather than for TDS’ causes of action for fraud.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.