Case Name: Axion Holding Cyprus Ltd., et al.v. Actio-Media, Inc., et al.
Case No.: 1-14-CV-265434
Defendants Clickberry, Inc. (erroneously sued as “Actio-Media, Inc. dba Clickberry) and Alex Babin (“Babin”) (collectively, “Defendants”) demur to the complaint (“Complaint”) filed by plaintiffs Axion Holding Cyprus Limited (“Axion”), Sergey Kondratov (“Kondratov”) and Alexey Girin (“Girin”) (collectively, “Plaintiffs”) and move to strike portions contained therein.
This is an action for fraud and conversion. During the period of July through December 2009, Axion, a company with its principle place of business in Cyprus, invested approximately $430,000 in a Russian company called Closed Joint Stock Company “Actio” (“Actio Russia”) in exchange for 12% of the shares of the company. (Complaint at ¶ 9.) In 2009-2010, Girin acquired 200,000 shares of Actio Russia and collectively contributed approximately 1.8 million Russian rubles to the company. (Id. at ¶ 10.)
In December 2011, Babin, who substantially controlled Actio Russia, formed a California corporation, Actio-Media, Inc. d/b/a Clickberry (“Actio-Media”). (Complaint at ¶ 12.) On information and belief, Plaintiffs allege that Babin transferred all of the capital, technological and intellectual property from Actio Russia and its business, which develops software for adding interactivity to videos, as Actio-Media in California. (Id.) Plaintiffs allege that a percentage of the foregoing belongs to them and yet they were not given any shares, interest or ownership in Actio-Media. (Id. at ¶¶ 14, 15.)
On May 16, 2014, Plaintiffs filed the Complaint asserting the following causes of action: (1) conversion; (2) fraud; (3) unjust enrichment; (4) common count- money had and received; and (5) constructive trust.
On July 1, 2014, Defendants filed the instant demurrer to each of the five causes of action asserted in the Complaint on the ground of failure to state facts sufficient to constitute a cause of action and to the first cause of action on the ground of uncertainty. Defendants also filed the motion to strike Plaintiffs’ request for attorney’s fees.
Defendants’ demurrer to the first cause of action (conversion) on the ground of uncertainty is OVERRULED. A demurrer for uncertainty is disfavored and will be sustained only where the allegations of the complaint are so unintelligible that the defendant cannot reasonably respond to them. (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) The allegations of the first cause of action do not qualify as such.
Defendants’ demurrer to the first cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.
Defendants’ contention that Plaintiffs lack standing to pursue a claim for conversion is well-taken. As currently pleaded in the Complaint, Girin and Axion’s relationships to Actio Russia, the holder of the capital, technological and intellectual property alleged to have been converted, are as shareholders. As there are no allegations of individual ownership of the foregoing items, their ownership of the converted materials is predicated on their status as shareholders. The essence of the first cause of action is that the assets of Actio Russia were transferred and utilized by Defendants without any compensation. This constitutes injury to the company itself and not the individual plaintiff shareholders. (Id.) As it is the property of the company, Actio Russia, that is alleged to have been converted, any potential claim belongs to it and no individual claims can be stated by shareholders Girin and Axion. (See e.g., PacLink Communications Intern., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 964.) To the extent that Girin and Axion wish to maintain a suit on Actio Russia’s behalf, they may only do so derivatively. (Id.)
Defendants’ demurrer to the second cause of action (fraud) on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. The elements of fraud are (1) misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity (or scienter), (3) intent to defraud, i.e., to induce reliance, (4) justifiable reliance, and (5) resulting damage. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) It is well-settled that fraud claims must be pleaded with particularity; this necessitates pleading facts showing how, when, where, to whom and by what means the alleged misrepresentations were tendered. (Id. at 645.) The allegations of the second cause of action fail to comply with the foregoing standard.
Defendants’ demurrer to the third cause of action (unjust enrichment) is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. “[T]here is no cause of action in California for unjust enrichment.” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.) However, unjust enrichment is synonymous with restitution (see Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1314), and courts will overlook the label of a cause of action to determine whether a claim warranting restitution has been stated. (See McBride v. Houghton (2004) 123 Cal.App.4th 379, 387-388.) While there are generally “several potential bases for a cause of action seeking restitution …. [including] where the defendant obtained a benefit from the plaintiff by fraud, duress, or similar conduct” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370), here, Plaintiffs have failed to state such a basis for the reasons articulated above.
Defendants’ demurrer to the fourth cause of action (common count- money had and received) is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. “A cause of action is stated for money had and received if the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff.” (Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1623 [internal quotations and citations omitted].) Plaintiffs fail to plead such a claim as there are no allegations that they gave Babin or Clickberry money; the funds pleaded in the Complaint were given to Actio Russia. (See Complaint at ¶¶ 9-10, 44-51.)
Defendants’ demurrer to the fifth cause of action (constructive trust) is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. “A constructive trust is not an independent cause of action but merely a type of remedy.” (Batt v. City and County of San Francisco (2007) 155 Cal.App.4th 65, 82 [internal citations and quotations omitted].) Having failed to plead a viable underlying cause of action, Plaintiffs have not pleaded a basis for a constructive trust.
Defendants’ motion to strike Plaintiffs’ request for attorney’s fees is GRANTED WITH 10 DAYS’ LEAVE TO AMEND. Parties to litigation must pay their own attorney’s fees, except as provided by statute or agreement, or where such fees are themselves part of the measure of damages. (See Essex Ins. Co. v. Five Star Dye House, Inc. (2006) 38 Cal.4th 1252, 1257; Code Civ. Proc., § 1021 [“[e]xcept as attorney’s fees are specifically provided for by statute, the measure of and mode of compensation of attorneys … is left to the agreement, express or implied, of the parties …”]; Code Civ. Proc., § 1033.5, subd. (a)(1) [attorney’s fees are “allowable as costs … when authorized by … contract, statute, or law”].) Plaintiffs have failed to plead a contractual or statutory basis for the recovery of attorney’s fees and costs.
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