Case Name:   Cremona v. Chiocca

Case No.:       1-14-CV-267229

This is a business dispute.  According to the allegations of the complaint, plaintiff Antonio Cremona (“Plaintiff”), Massimo Chiocca (“Defendant”) and Andrea Merafina (“Merafina”) formed Tridente Restaurant Group, LLC to open an Italian restaurant, Vero, in Palo Alto.  (See complaint, ¶¶ 1-5.)  Plaintiff paid $10,000, covering Merafina’s $5,000 share for the extra time he would spend to open and run the restaurant, and Defendant paid $5,000.  (See complaint, ¶ 7.)  Plaintiff and Defendant discovered that Merafina had been grossly mismanaging the finances of the restaurant, and after confronting Merafina about his misconduct, Merafina left the partnership and his whereabouts are unknown.  (See complaint, ¶ 9.)  Thereafter, Plaintiff and Defendant orally decided that the LLC would be a partnership split equally among themselves.  (See complaint, ¶ 10.)  Defendant then engineered the restaurant’s finances so that Plaintiff never received any payment for his work, failed to inform Plaintiff as to the true circumstances of workplace disputes and its profitability, the sale of the restaurant and locked Plaintiff from access to the restaurant.  (See complaint, ¶¶ 17-26.)  Defendant also used the restaurant’s credit cards for personal expenses.  (See complaint, ¶ 16.)

On January 17, 2011, Defendant met with the IRS on the restaurant to discuss issues regarding the restaurant’s taxes, but concealed this information from Plaintiff.  (See complaint, ¶¶ 46-48.) On May 8, 2011, while looking for a wine opener in the office drawers of the restaurant, Plaintiff found a letter from the IRS regarding the meeting.  (See complaint, ¶ 47.)  Plaintiff asked Defendant about why Defendant had withheld the letter from Plaintiff and what the outcome of the meeting was; in response, Defendant told him that he attended the meeting on Plaintiff’s behalf and that everything was okay as a result.  (See complaint, ¶ 49.)  Unfortunately, on February 27, 2014, Plaintiff received a letter from the IRS notifying him that it believed Plaintiff to be personally liable for the restaurant’s back taxes, as well as penalties, and Plaintiff asserts that it is due to Defendant’s handling of the finances.  (See complaint, ¶¶ 11, 27-28, 39-52.)

On June 27, 2014, Plaintiff filed a complaint against Defendant, asserting causes of action for: breach of fiduciary duty; breach of the duty of loyalty; negligence; and, fraudulent misrepresentation.  Defendant demurs to the entire complaint on the ground that Plaintiff lacks standing to assert claims against Defendant because the claims must be brought by the company via a derivative action.[1]

As Defendant asserts, “[a] limited liability company is a hybrid business entity formed under the Corporations Code and consisting of at least two ‘members’… who own membership interests… [and t]he company has a legal existence separate from its members.”  (Paclink Communications International, Inc. v. Super. Ct. (Yeung) (2001) 90 Cal.App.4^th 958, 963; see also Denevi v. LGCC, LLC (2004) 121 Cal.App.4^th 1211, 1215, fn.1 (Sixth District case, also stating that “[l]ike corporate shareholders, members of a limited liability company hold no direct ownership interest in the company’s assets”).)  “Because a corporation is a legal entity separate from its shareholders [citation], when a corporation has suffered an injury to its property the corporation is the party that possesses the right to sue for redress.”  (Denevi, supra, 121 Cal.App.4^th at p.1216, fn.3.)  “If a corporation fails to pursue redress of an injury, a shareholder may file a derivative action on behalf of the corporation.”  (Id.)  “However, one who has suffered injury both as an owner of a corporate entity and in an individual capacity is entitled to pursue remedies in both capacities.”  (Id. at p.1221.)  “The claims are derivative where the injury alleged is one inflicted on the corporate entity or on the ‘whole body of its stock.’”  (Id. at p.1222.)  “A personal claim, in contrast, asserts a right against the corporation which the shareholder possesses as an individual apart from the corporate entity:  ‘If the injury is not incidental to an injury to the corporation, an individual cause of action exists.’”  (Id.)  “[W]here a defendant commits torts against two distinct persons, he is presumptively liable to each of them for the full amount of that plaintiff’s losses, even if both torts involve the same subject matter.”  (Id. at p.1223.)

Here, the allegations certainly suggest injury to Plaintiff apart from the LLC.  Although the complaint alleges that Defendant’s misfeasance or nonfeasance resulted in injury to the company, the complaint also alleges that Defendant’s fraud and breach of his fiduciary duties owed to a partner resulted in direct injury to Plaintiff as he is allegedly personally liable for certain monies owed to the IRS as a result of Defendant’s actions.  The demurrer to the complaint is OVERRULED.

The Court will prepare the Order.  The parties are reminded of their case management conference on October 21, 2014 at 1:30 p.m.

[1] Within his demurrer, Defendant requested judicial notice of certain information regarding Tridente Restaurant Group, LLC.  This is not appropriate.  (See Rule of Court 3.1113, subd. (l) (stating that “[a]ny request for judicial notice must be made in a separate document listing the specific items for which notice requested”).)  Accordingly, the request for judicial notice is DENIED.  However, as will be discussed below, the request for judicial notice has no impact on the Court’s ruling.