Case Number: BC656328 Hearing Date: March 09, 2018 Dept: 47

CMB Export, LLC, et al. v. American Development Center, LLC, et al.

(1) MOTION TO SEAL DOCUMENTS

(2) & (3) DEMURRERS TO SECOND AMENDED COMPLAINT (x2);

(4) MOTION TO STRIKE

MOVING PARTY: (1) & (2) Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook

(3) & (4) Defendants American Development Center, LLC, ADC Downey, LP, Industrial Realty Group, LLC, IRG Downey, LLC and Stuart Lichter

RESPONDING PARTY(S): (1) No opposition filed.

(2) Plaintiffs CMB Export, LLC and CMB Export Infrastructure Investment XV, LP;

(3) & (4) Plaintiffs CMB Export, LLC and CMB Export Infrastructure Investment XV, LP

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiffs allege that Defendants have taken credit for Plaintiffs’ industry accomplishments, concepts and creations and have utilized Plaintiffs’ trade secrets in Defendants’ own business dealings.

Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook move to file document under seal and demur to the second amended complaint.

Defendants American Development Center, LLC, ADC Downey, LP, Industrial Realty Group, LLC, IRG Downey, LLC and Stuart Lichter also demur to the second amended complaint and move to strike portions thereof.

TENTATIVE RULING:

Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook’s motion to file documents under seal is GRANTED.

Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook’s demurrer to the second amended complaint is OVERRULED as to the first and second causes of action.

Defendants American Development Center, LLC, ADC Downey, LP, Industrial Realty Group, LLC, IRG Downey, LLC and Stuart Lichter’s demurrer to the second amended complaint is OVERRULED as to the second cause of action and SUSTAINED without leave to amend as to the third cause of action. The demurrer to the fourth and fifth cause of action is MOOT.

The Court, on its own motion, orders stricken the fourth cause of action for violation of the Lanham Act (Unfair Competition) and the fifth cause of action for violation of the Lanham Act (False Advertising), and the associated prayer for relief at ¶ 6, Page 21 of the second amended complaint.

All Defendants are ordered to answer the remaining allegations in the second amended complaint within 10 days.

DISCUSSION

Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook’s Motion To Seal Documents

Defendants PCCP IRG Downey, LLC, et al. move for an order sealing: (1) the First amended to the Loan Agreement between PCCP and IRG Downey, LLC as borrowers and CMB Export Infrastructure Investment Group XV, LP as lender, attached as Exh. A to the Request for Judicial Notice in support of the demurrer; (2) Redacted portions of the memorandum of points and authorities in support of the demurrer, which quote a document previously filed under seal.

On November 20, 2017, the Court ordered sealed the Loan Agreement on the basis that confidentiality was required by Civil Code § 3426.5 as to alleged trade secrets. Cypress Semiconductor Corp. v. Maxim Integrated Products, Inc. (2015) 236 Cal.App.4th 243, 255; In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298-99. In this regard, the Court finds that the redacted portions of the memorandum of points and authorities in support of the demurrer, which quote a document previously filed under seal, and the Amendment to the previously-sealed Loan Agreement is also properly ordered sealed.

As such, the motion to file documents under seal is GRANTED.

Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook’s Demurrer

Requests For Judicial Notice

Defendants request that the Court take judicial notice of: (1) Loan agreement between PCCP and IRG Downey, LLC as borrowers and CMB Export Infrastructure Investment Group XV, LP as lender, dated November 14, 2012; (2) First Amended to the Loan Agreement between PCCP and IRG Downey as borrowers and CMB Group XV as lender, dated March 29, 2013; (3) Loan Agreement between BrightSource Ivanpah Fundings, LLC as borrower and CMB Infrastructure Investment Group VII dated November 21, 2011; (4) March 30, 2013 Policy Memorandum from the United States Citizenship and Immigration Service (PM-6-2-003).

Request No. 1 is GRANTED. This specific agreement is referenced in the 2AC at ¶ 32. On demurrer, judicial notice may be taken of documents which form the basis of the allegations in the complaint. Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285 n.3.

Request No. 2 is GRANTED. This specific amendment is referenced in the 2AC at ¶ 32.

Request No. 3 DENIED. This is evidence extrinsic to the 2AC of which the Court may not take judicial notice pursuant to Evid. Code § 452. This agreement does not form the basis of any of Plaintiff’s causes of action. Defendants’ attempt to introduce this document of evidence disproving the disclosure of confidential information. However, “[t]he demurrer admits the facts pleaded in the complaint and raises the question whether those facts are sufficient to state a cause of action on any legal theory. . . . ‘The function of a demurrer is to test the sufficiency of the complaint alone and not the evidence or other extrinsic matters. [Citation.]’ (Citation omitted.)” Hellum v. Breyer (2011) 14 Cal.App.4th 1300, 1308-09. Defendants’ claim that Plaintiffs have referenced this agreement in the 2AC at footnote 3 is not well-taken. Nowhere in footnote 3 does Plaintiff identify this particular agreement, and such reference was made in protest of Defendants’ prior reference to this particular agreement.

Request No. 4 is GRANTED.

Case law permits judicial notice to be taken of agency memoranda. (See, e.g., People v. French (1978) 77 Cal.App.3d 511, 521 [143 Cal.Rptr. 782]; ABC Acceptance v. Delby (1957) 150 Cal.App.2d Supp. 826, 828 [310 P.2d 712].)

Truta v. Avis Rent a Car Sys. (1987) 193 Cal.App.3d 802, 809 n. 6.

Meet and Confer

The Declaration of Ryan Iwahashi reflects that the meet and confer requirement set forth in CCP § 430.41 was satisfied.

Analysis

1. First Cause of Action (Breach of Contract); Second Cause of Action (Misappropriation of Trade Secrets).

As to the breach of contract cause of action, ¶¶ 26 and 45 of the 2AC alleges that on February 15, 2012, Plaintiff CMB and Defendant PCCP IRG entered into a Confidentiality and Non-Disclosure Agreement (“NDA”). A copy is attached to the 2AC as Exh. A thereto. Plaintiffs allege that the NDA compels PCCP IRG to keep CMB’s “Confidential Information”—defined as any and all information disclosed by CMB to PCCP IRG relating to CMB’s business or technology that CMB “designates as being confidential or which, under the circumstances surrounding disclosure, should be treated as confidential”—in confidence, and to refrain from disclosing that information to any third parties. ¶¶ 27, 46. The NDA defines confidential information to include CMB’s “confidential business and technical information, such as financial information or data, marketing plans, disclosure of marketing agents or similar consultants, techniques and material, concepts, business plans and strategies, business operations and systems, economic analyses, pricing policies, information concerning employees, customers and/or vendors, trade secrets, discoveries, inventions, improvements, research, development, know-how, concepts, designs, produces, compositions, formulas, prototypes, materials and manufacturing process.” Id.

PCCP IRG also agreed, as part of the NDA, that it would not “(i) [p]ublish, disseminate or otherwise disclose or make available Confidential Information received hereunder to any person, firm or corporation without the prior written consent of” CMB; and would not “(ii) [u]se Confidential Information for any purpose, including, without limitation, selling, leasing, renting, licensing, marketing or otherwise distributing any Confidential Information or products or services embodying or derived from same.” 2AC, ¶¶ 28, 47. After the NDA was executed by the parties, Plaintiff began providing PCCP IRG with access to CMB’s Confidential Information, including drafts of a CMB Loan Agreement. ¶ 31.

¶ 32 of the 2AC alleges that on November 14, 2012, the CMB Loan Agreement entered into between Defendants PCCP IRG and IRG Downey, as borrowers, with Plaintiff contained and included multiple instances and specific examples of Plaintiff CMB’s confidential and proprietary information and concepts, including, but no limited to, provisions involving (1) the Cleared Investor, (2) Cleared Investor Report, (3) EB-5 Requirements of Borrower, and (4) EB-5 Requirements of Lender. Plaintiffs allege that such confidential, proprietary information and trade secrets contained in the CMB Loan Agreement include provisions relating to membership pledges, ancillary investments, redeployment, prepayment, fund transfer system and bridge financing in the context of an EB-5 loan. Id.

Plaintiffs allege that on January 14, 2014, the principals of IRG formed a Regional Center known as ADC and improperly misrepresented as its own, in the EB-5 industry, Plaintiff CMB’s accomplishments, concepts and creations. ¶ 343. Plaintiff alleges that ADC maintained a website claiming that ADC was a premiere EB-5 Regional Center responsible for securing hundreds of approved 1-526 and I-829 petitions, but ADC was claiming credit for these accomplishments which Plaintiff CMB had in fact facilitated and obtained. ¶ 35. Although Plaintiff confronted ADC’s false claims to the attention of IRG, ADC and Lichter, Defendants continued to take credit for Plaintiff’s accomplishments in the China and Vietnam marketplace. ¶¶ 36 – 38.

As to the misappropriation of trade secrets cause of action, Plaintiffs allege that in April 2015, Plaintiff obtained a copy of a Loan Agreement dated September 20, 2014 among Defendants PCCP IRG and IRG Downey, as borrowers, and Defendant ADC Downey, as lender (the “ADC Downey Loan Agreement”). 2AC, ¶ 40. Plaintiff alleges that this was a virtual carbon copy of the CMB Loan Agreement dating to 2012 and amended in 2013. Id. Plaintiff alleges that its competitor, ADC, was able to obtain an extraordinarily unfair advantage by misappropriating the years of hard work and ingenuity that was reflected in and represented by the CMB Loan Agreement and the known trade secrets within it. Id.

Defendants argue that Plaintiff has failed to plead the existence of any confidential information or trade secrets contained in the Loan Agreement.

Here, ¶ 32 at Pages 7 – 10 sufficiently plead, by reference to the page number and paragraph number in the Loan Agreement, why the information contained in the Loan Agreement constitutes confidential information and/or trade secrets. Plaintiff is not required to disclose the actual language in the public record. Plaintiff’s allegations are sufficient to plead the existence of arguable confidential information and/or trade secrets.

“The sole issue raised by a general demurrer is whether the facts pleaded state a valid cause of action, not whether they are true. No matter how unlikely or improbable, plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer. (Citation omitted.) Furthermore, plaintiff’s possible inability or difficulty in proving the allegations of the complaint is of no concern. (Citation omitted.)” Kerivan v. Title Ins. & Trust Co. (1983) 147 Cal.App.3d 225, 229.

As such, the demurrer to the first and second causes of action is OVERRULED.

Defendants PCCP IRG Downey, LLC, Silverspeak Real Estate Partners, L.P., and Jeff Cook are ordered to answer the second amended complaint within 20 days.

Defendants American Development Center, LLC, ADC Downey, LP, Industrial Realty Group, LLC, IRG Downey, LLC and Stuart Lichter’s Demurrer

Meet and Confer

The Declaration of Kevin D. Gamarnik reflects that the meet and confer requirement set forth in CCP § 430.41 was satisfied.

Analysis:

1. Second Cause of Action (Misappropriation of Trade Secret).

The Court incorporates by reference its discussion as to the PCCP Defendants’ demurrer to the second amended complaint, above. For the same reasons, the demurrer to the second cause of action is OVERRULED.

2. Third Cause of Action (Unfair Competition).

Demurring Defendants IRG and ADC have allegedly used Plaintiff CMB’s accomplishments and falsely and fraudulently claimed such accomplishments as their own in promotional materials distributed to potential investors. 2AC, ¶ 65. This conduct in connection with the formation of a competing Regional Center touting Plaintiffs’ accomplishments in the China and Vietnam markets is alleged at ¶¶ 35 – 39.

When a plaintiff who claims to have suffered injury from a direct competitor’s “unfair” act or practice invokes section 17200, the word “unfair” in that section means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.

Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 186 (bold emphasis added).

However, the Court finds Defendant’s argument that Plaintiff has not sufficiently pled standing to be persuasive. ¶ 68 alleges that Plaintiff has lost customers/clients—together with revenue that would have been generated by those customers/clients—that Plaintiff would have otherwise secured absent the acts and conduct of Defendant.

“The purpose of the UCL ‘is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. [Citation.]’ [Citations.]” (Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 252 [106 Cal. Rptr. 3d 46].) “The UCL sets out three different kinds of business acts or practices that may constitute unfair competition: the unlawful, the unfair, and the fraudulent. [Citations.]” (Rose v. Bank of America, N.A. (2013) 57 Cal.4th 390, 394 [159 Cal. Rptr. 3d 693, 304 P.3d 181].) “‘“… California courts have consistently interpreted the language of section 17200 broadly.”’ [Citation.]” (Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1007 [144 Cal. Rptr. 3d 4].) Nevertheless, in addition to proving the elements of his or her claim, a private party must establish standing to bring a UCL action. (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1097–1098 [61 Cal. Rptr. 3d 716] (Daro).)

. . .

A “private person has standing to sue under the UCL only if that person has suffered injury and lost money or property ‘as a result of such unfair competition.’ [Citation.]” (Daro, supra, 151 Cal.App.4th at p. 1098, italics omitted.) To satisfy the UCL standing requirement, the plaintiff must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322 [120 Cal. Rptr. 3d 741, 246 P.3d 877], italics omitted (Kwikset).)

Two Jinn, Inc. v. Government Payment Service, Inc. (2015) 233 Cal.App.4th 1321, 1331 (bold emphasis and underlining added).

“There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary. [Citation.]” (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 323.) The foregoing list is not exhaustive and the notion of “lost money” under the UCL is not limited. (51 Cal.4th at p. 323.) Moreover, “the quantum of lost money or property necessary to show standing is only so much as would suffice to establish injury in fact” and “it suffices … to ‘ “allege [ some specific, ‘identifiable trifle’ of injury.” ’ [Citations.]” (Id. at pp. 324–325, fn. omitted.) “ ‘ “The basic idea … is that an identifiable trifle is enough for standing to fight out a question of principle; the trifle is the basis for standing and the principle supplies the motivation.” ’ [Citation.]” (Id. at p. 325, fn. 7.)

Law Offices of Mathew Higbee v. Expungement Assistance Services (2013) 214 Cal. App. 4th 544, 561 (bold emphasis added).

In this regard, Plaintiffs have still not sufficiently pled an injury in fact for purposes of standing to bring the B & P Code § 17200 claim, because Plaintiffs have not specifically pled that they actually lost money or property as a result of Defendants’ alleged business practices. For instance, there is still no allegation that Plaintiffs had a property interest in customers in the China or Vietnam markets such that Plaintiffs lost business as a result of Defendants’ alleged business practices. “[S]tatutory causes of action must be pleaded with particularity.” Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.

Because Plaintiffs were specifically instructed by this Court in the last demurrer ruling to plead specific facts giving rise to standing in connection with the Court’s ruling on the prior demurrer, and they have failed to do so in the 2AC, the court will conclude that they are simply unable to do so, as such, the demurrer to the third cause of action is SUSTAINED without leave to amend.

3. Fourth Cause of Action (Violation of the Lanham Act—Unfair Competition); Fifth Cause of Action (Violation of the Lanham Act (False Advertising).

As discussed below, the Court is striking the fourth and fifth causes of action on its own motion, as having been added without leave of court. Accordingly, the demurrer to the fourth and fifth causes of action is MOOT.

Defendants American Development Center, LLC, ADC Downey, LP, Industrial Realty Group, LLC, IRG Downey, LLC and Stuart Lichter’s Motion To Strike

Defendants did not submit a meet and confer declaration as required by CCP § 435.5 (effective January 1, 2018). Nonetheless, the fourth cause of action for violation of the Lanham Act (Unfair Competition) and the fifth cause of action for violation of the Lanham Act (False Advertising), and the associated prayer for relief at ¶ 6, Page 21 of the 2AC are ordered stricken on the Court’s own motion pursuant to CCP § 436(b)[1] as having been added without first obtaining leave of court.

Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. (People ex rel. Dept. Pub. Wks. v. Clausen (1967) 248 Cal.App.2d 770, 785 [57 Cal. Rptr. 227] [leave to amend complaint does not constitute leave to amend to add new defendant].) The plaintiff may not amend the complaint to 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. (See Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 [84 Cal. Rptr. 3d 642] [acknowledging rule but finding it inapplicable where new cause of action “directly responds” to trial court’s reason for sustaining the demurrer].) Here, the new cause of action is not within the scope of the order granting leave to amend.

Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.

Here, Plaintiff added two federal causes of action, which are not within the scope of leave to amend previously granted by the Court.

All Defendants are ordered to answer the remaining allegations in the second amended complaint within 10 days.

Defendants American Development Center, LLC, et al. to give notice.

IT IS SO ORDERED.

Dated: March 9, 2018 ___________________________________

Randolph M. Hammock

Judge of the Superior Court