2010-00086964-CU-CO

Rafael Perez vs. James Kouretas

Nature of Proceeding: Hearing on Demurrer to First Amended Complaint

Filed By: Kohls, Daniel V.

***If any party requests oral argument, then at the time the request is made, the
requesting party must inform the court and opposing counsel of the specific
causes of action or issue(s) on which oral argument is sought.***

Defendant James Kouretas’ (“Kouretas”) demurrer to the first amended complaint
(“FAC”) is OVERRULED as follows:

Background Facts/Procedure

This is a legal malpractice action. The action stems from a 2005 partnership
agreement to reopen a casino and renew a gambling license. Plaintiff Rafael Perez
(“R. Perez”) was one partner, and the other partner was third party Fay Stearns
(“Stearns”). In 2005 R. Perez formed a separate partnership with Plaintiffs Pedro
Perez and David Hurley to capitalize and operate the casino with Stearns. R. Perez
was slated to become the casino’s sole owner in 2009.

Plaintiffs allegedly retained Kouretas to help renew the gambling license, review the
partnership agreement between R. Perez and Stearns, finalize the partnership
agreement among Plaintiffs, and negotiate the terms of a lease for the casino.
According to Plaintiffs, Kouretas abused his position of trust and confidence and, in
2010, took the casino for himself.

The complaint contains causes of action for legal malpractice, breach of fiduciary duty,
constructive fraud, intentional interference with prospective economic relations,
interference with contracts, fraud, negligent misrepresentation and “Fraud–
Suppression of Fact.” Kouretas now demurs to each of these causes of action on
grounds that the allegations fail to state facts sufficient to state a cause of action.

In bringing his demurrer, Kouretas notes that, although this demurrer is the first that
the court has addressed on the merits, other law and motion practice and discovery
have already taken place. Among other things, the court granted Kouretas’ anti-
SLAPP motion and entered a judgment of dismissal in 2011. The Court of Appeal
reversed the judgment in 2013. Nonetheless, Kouretas contends that Plaintiffs made
several judicial admissions in their previously filings and that those admissions support
the instant demurrer. Thus, Kouretas has asked the court to take judicial notice of
several of Plaintiffs’ previous filings, as well as his own declaration filed on December
2, 2010.

Discussion

Preliminarily, the court observes that Kouretas has dropped several footnotes in his
Moving Memorandum of Points and Authorities meant to highlight differences between
the original complaint and the FAC. However, there is no accompanying argument in
the moving papers that the differences are so contradictory that the court should
disregard allegations in the FAC based on the sham pleading doctrine. Accordingly,
the court disregards the footnotes in question.

Statute of Limitations

Kouretas’ first argument is that all the causes of action in the FAC other than those
based on fraud are barred by the one-year statute of limitations at CCP § 340.6. That
section requires a plaintiff proceeding against an attorney rendering professional
services to bring actions (other than those based on actual fraud) either “within one
year after the plaintiff discovers, or through the use of reasonable diligence should
have discovered, the facts constituting the wrongful act or omission, or four years from
the date of the wrongful act or omission, whichever occurs first.” (CCP § 340.6(a).)
Kouretas bases his statute-of-limitations argument on his contentions that (1) Plaintiffs’
knew that he had withdrawn from the State’s consideration their “Key Employee”
applications no later than July 2007 [state approval is required for designation as a key
employee in a California casino], (2) Plaintiffs knew that he had acquired an interest in
the casino by 2008, (3) Plaintiffs knew that he had brought in his own investors by
2007, and (4) Plaintiff Hurley asked Kouretas for a job at the casino in 2008. (See
Moving memo. at 7:18-27.)

With respect to the Kouretas’ contention that Plaintiffs knew he had withdrawn Key
Employee applications no later than July 2007, the contention is rejected because the
court declines to take judicial notice of the documents supporting the contention. The
documents at issue are attached to Kouretas’ Request for Judicial Notice as Exhibits H
and I. Each document is dated in 2007 and appears to be a letter from the State
Gambling Control Commission to Stearns. Each indicates that that the Commission
received a request to withdraw a Key Employee License Application, i.e., for Plaintiff P.
Perez and Plaintiff Hurley. Exhibit H indicates that the document was “cc’d” to Plaintiff
P. Perez, and Exhibit I indicates that it was cc’d to Plaintiff Hurley. There is nothing
further before the court to indicate that any Plaintiff actually received a copy of either
exhibit.

Kouretas does not cite any case holding that, based solely on the two documents
attached to his Request for Judicial Notice, the court may take judicial notice of the
facts that Plaintiffs knew or should have known that the Key Employee applications
were withdrawn. (Compare Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th
1057, 1063-1064 [“The taking of judicial notice of the official acts of a governmental
entity does not in and of itself require acceptance of the truth of factual matters which
might be deduced therefrom, since in many instances what is being noticed, and
thereby established, is no more than the existence of such acts and not, without
supporting evidence, what might factually be associated with or flow therefrom”]
[citation and internal quotation marks omitted], overruled on another point by In re
Tobacco Cases II (2007) 41 Cal.4th 1257.) Hence, although the court takes judicial
notice of the fact that the letters were issued, it does not take judicial notice of any fact
establishing when one or more of the Plaintiffs knew or should have known when
Kouretas withdrew the Key Employee applications.

Kouretas’ alleged withdrawal of the Key Employee applications is a predicate for each
cause of action in the FAC. (See FAC, ¶¶ 12, 18, 27, 28, 30, 33, 36, 37, 40, 45, 49,
51, 54, 60, 83 and 84.) Hence, even if Plaintiffs’ other predicates present claims that
are time-barred, the court is required to overrule the demurrers: a court must overrule
a demurrer to a complaint if the allegations state a cause of action on any theory. See,
e.g., Zhang v. Superior Court (2013) 57 Cal.4th 364, 370 [citation omitted].) As a
consequence, Kouretas’ statute-of-limitations arguments are unavailing.

In reaching its conclusion, the court is aware of Kouretas’ argument that any

reasonable person should have suspected causes of action against an attorney once
(s)he learned that the attorney had acquired an interest in the enterprise the attorney
was hired to facilitate. Given Plaintiffs’ allegations that Kouretas assured them that he
was placing the business in his name until it could be transferred to them, the issue of
reasonableness presents a factual question that the court may not resolve on
demurrer. Given Plaintiffs’ allegations of a prospective transfer from Kouretas to them,
Kouretas’ assertions that Plaintiffs knew he possessed an interest in the casino and
obtained a license for the casino in his name–both purportedly outside the statue of
limitations outside–does not alter the court’s conclusion.

Standing

Next, Kouretas argues that the demurrers to the second through eighth causes of
action should be sustained because the partnerships–not the individual Plaintiffs–have
standing to pursue claims based on the lost casino license. The court rejects this
argument because, as noted above, Kouretas has not persuaded the court that the
causes of action cannot survive based on allegations of the withdrawn Key Employee
applications.

The Sixth, Seventh and Eighth Causes of Action for Fraud, Negligent
Misrepresentation and Fraud-Suppression of Fact

Kouretas argues that the sixth and seventh causes of action are defective due to
inadequate allegations of causation. Kouretas contends that the enumerated
damages were incurred before he allegedly made any misrepresentations. Kouretas
cites several exhibits to his Request for Judicial Notice to support this contention.
(See Moving Memo. at 13:16-19.) Having reviewed the documents on which Kouretas
relies, the court is not persuaded that they definitively demonstrate that Plaintiffs could
not have suffered any damages after Kouretas allegedly made the misrepresentations
in 2007. In this regard, the court notes Plaintiffs’ allegations that they were damaged
by undertaking to promote the casino in reliance on Kouretas’ alleged
misrepresentations. (See FAC, ¶ 74(vi).) The documents on which Kouretas relies do
not demonstrate that Plaintiffs could not have incurred any such damages after the
misrepresentations were allegedly made. Moreover, although paragraph 51 of the R.
Perez Declaration (Exh. C to Kouretas’ RJN) could be taken to limit R. Perez’
damages by way of promotional efforts, it does not establish that R. Perez did not
engage in any promotional activities, and it says nothing about the other Plaintiffs’
promotional efforts.

Next, Kouretas argues that the Eighth Cause of Action for Fraud–Suppression of Fact
is defective because Plaintiffs’ judicial admissions contradict any allegations that
Kouretas suppressed any fact. (See Moving Memo. at 13:28-14:4.) The court has
reviewed the documents on which Kouretas relies and concludes that the documents
do not preclude an inference that Kouretas suppressed the fact that he intended to
own and operate the casino without Plaintiffs. (See FAC, ¶ 84(b).) Thus, the court
rejects the argument.

Kouretas next argues that the Fraud-Suppression of Fact cause of action is defective
because the allegations of causation are contradicted by Plaintiffs’ admission
elsewhere. (See Moving Memo. at 14:8-19.) Again, the court’s review of the records
does not disclose any admission that requires the demurrer to be sustained.

Finally, Kouretas argues that the Seventh Cause of Action for Negligent
Misrepresentation is defective. To the extent Kouretas argues that the seventh cause
of action is vague and ambiguous, the court disregards the argument. Kouretas’
demurrer is not based on uncertainty, (see Demurrer at 2), and any arguments as to
vagueness or ambiguity are immaterial to the motion.

Insofar as Kouretas argues that the misrepresentations supporting the seventh cause
of action are inactionable opinions about the future, the court disagrees. (See Moving
Memo. at 15:2-18.) The misrepresentation at paragraph 70(e), which is incorporated
by reference in to the seventh cause of action, pertains to the past. And insofar as
Kouretas contends that Plaintiffs must allege additional facts to establish that their
reliance was reasonable, the court disagrees. Plaintiffs’ allegations can be construed
to establish an attorney-client relationship, and reliance on one’s attorney can be
certainly be construed as reasonable.

Judicial Notice

The parties’ requests for judicial notice of court documents and official records are
GRANTED. In taking judicial notice, the court accepts the existence of the documents
and their contents, not the truth of their contents. Furthermore, declarations are not a
proper subject of judicial notice. (See Big Valley Band of Pomo Indians v. Superior
Court (2005) 133 Cal.App.4th 1185, 1192.)

Conclusion

The demurrer is OVERRULED.

Kouretas is directed to file and serve his answer no later than May 6, 2014.

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