Jean-Luc Cornet, et al. v. Brar

Case Name: Cornet, et al. v. Brar, et al.
Case No.: 1-13-CV-241439

This is an action for breach of contract regarding the sale of a restaurant. The cross-complaint alleges that on December 1, 2011, cross-complainant Kaddu, Inc. (“Kaddu”) entered into an agreement with cross-defendant Sandrine Cornet to allow her to take possession of the restaurant known as Da Zucca. (See cross-complaint (“XC”), ¶ 8.) Cornet paid Kaddu $200,000 of the $390,000 purchase price. (Id.) In January 2012, Cornet formed Opa Verde, Inc. (“Opa Verde”) (collectively with Cornet, “cross-defendants”) to enter into the operative purchase agreement. (See XC, ¶ 9.) On January 30, 2012, Kaddu and Opa Verde entered into a contract entitled “Business Purchase Agreement” where Opa Verde agreed to purchase Kaddu and its assets, assume the existing lease, apply to transfer Kaddu’s state liquor license into their name, transfer all utilities in their name, and mediate any dispute or claim. (See XC, ¶ 10.) Despite Kaddu’s performance, cross-defendants failed to assume the existing lease, transfer Kaddu’s state liquor license into their name, or transfer the utilities into their name. (See XC, ¶ 15.) In addition, cross-defendants instead filed a complaint without mediating or attempting to mediate the dispute as agreed. (See XC, ¶ 17.) Cornet is alleged to be the alter ego and sole shareholder of Opa Verde. (See XC, ¶ 4.) On August 12, 2013, cross-complainant Kaddu filed the XC against cross-defendants for: breach of contract; embezzlement/conversion; declaratory relief; and, accounting.

On November 18, 2014, Kaddu filed a first amended cross-complaint (“FAXC”) now alleging that “JEAN LUC CORNET is the father of SANDRINE CORNET and an active investor and/or shareholder and/or the alter ego of OPA VERDE, INC., a California Corporation, and as such, is subject to this court’s jurisdiction.” (FAXC, ¶ 4.) The FAXC made similar allegations regarding Arlette Gauze Sanouillet—Cornet’s mother—and Remy Sanouillet, Cornet’s stepfather. (See FAXC. ¶¶ 5-6.) The FAXC newly alleges that Jean-Luc Cornet, Arlette Gauze Sanouillet and/or Remy Sanouillet (collectively, “The Sanouillets”) assisted or arranged for the incorporation of Opa Verde, have undisclosed ownership interests in Opa Verde, and have used Opa Verde to avoid, hinder, delay and defraud existing and subsequent creditors including Kaddu. (See FAXC, ¶ 5.) The FAXC adds a fifth cause of action for “investor liability/agency/ respondeat superior” against Jean-Luc Cornet and The Sanouillets.

Jean-Luc Cornet is, and at all relevant times was, a resident of the State of Washington. Jean-Luc Cornet moves to quash service of the summons, asserting that, as alleged in the initial complaint, he is not the alter ego of Opa Verde and the Court lacks jurisdiction over him. Jean-Luc Cornet and The Sanouillets also demur to the FAXC.

Jean-Luc Cornet’s motion to quash

Where a defendant properly moves to quash service of summons the burden of proof is on the plaintiff to prove facts that warrant the exercise of either general or special jurisdiction over the defendant. (See Goehring v. Super. Ct. (Bernier) (1998) 62 Cal.App.4th 894, 903; see also Sheard v. Super. Ct. (1974) 40 Cal.App.3d 207, 211; see also Summers v. McClanahan (2006) 140 Cal.App.4th 403, 413; see also Evangelize China Fellowship, Inc. v. Evangelize China Fellowship, Hong Kong (“Evangelize”) (1983) 146 Cal.App.3d 440, 444.) To satisfy its initial burden, “[t]he plaintiff must do more than merely allege jurisdictional facts,” but instead “must provide affidavits and other authenticated documents in order to demonstrate competent evidence of jurisdictional facts.” (In re Auto. Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 110.) If there is a conflict in the parties’ evidence, then the court must weigh the evidence and resolve the conflict, and its findings will not be disturbed on appeal if there is substantial evidence supporting its conclusions. (See Goehring v. Super. Ct., supra, 62 Cal.App.4th at p. 903.)

California courts may assume jurisdiction over a nonresident defendant if the defendant has sufficient minimum contacts with the forum state to make the exercise of jurisdiction fair. (See Goehring v. Super. Ct., supra, 62 Cal.App.4th at p. 903; see also Code Civ. Proc., § 410.10 [California courts “may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States”].) Where general jurisdiction is not established, a court may nonetheless assume specific jurisdiction over a defendant in an action if the following criteria are met: (1) the defendant purposefully avails itself of the forum state, (2) the action arises out of the defendant’s contacts with the forum state, and (3) the exercise of jurisdiction would be fair and reasonable. (See Goehring v. Super. Ct., supra, 62 Cal.App.4th at p. 904.)

Jean-Luc Cornet’s request for judicial notice of the cross-complaint and the December 31, 2014 order regarding the cross-defendants’ motion for summary adjudication is GRANTED. (Evid. Code § 452, subd. (d).)

Here, Kaddu does not demonstrate that Jean-Luc Cornet is the alter ego of Opa Verde, and even weighing the evidence submitted by both parties, the Court finds insufficient evidence to conclude that Jean-Luc Cornet is the alter ego of Opa Verde. (See Jean-Luc Cornet decl., ¶¶ 1-5; see also Sandrine Cornet decl., ¶¶ 1-4; see also Sandrine Cornet deposition transcript, pp.56:12-25, 57:1-2; see also Opa Verde PMQ deposition transcript, p.42:8-22; see also Singha decl., exhs. B-D.) Although Kaddu demonstrates that Jean-Luc Cornet did wire $200,000 to Sandrine Cornet, it fails to demonstrate that such transaction would establish jurisdiction over Jean-Luc Cornet—even if he was investing in Opa Verde. (See In re Automobile Antitrust Cases I & II (2005) 135 Cal.App.4th 100, 121 (stating that “[i]nvestment alone is not a sufficient ground to exercise general jurisdiction, even if the foreign corporation could have chosen to simply run the local business itself”); see also F. Hoffman-La Roche, Ltd. v. Super. Ct. (Wertheimer) (2005) 130 Cal.App.4th 782, 802 (stating that “[w]here, as here, the evidence establishes that the business of the foreign holding company is mere passive investment, the exercise of jurisdiction based on a theory of agency is wholly improper”); see also Dorel Industries, Inc. v. Super. Ct. (Jackson) (2005) 134 Cal.App.4th 1267, 1277 (stating that where a foreign “parent is merely a holding company whose only business pursuit is the investment in the subsidiary… [that] does not support jurisdiction”); see also Sonora Diamond Corp. v. Super. Ct. (Sonora Union High School Dist.) (2000) 83 Cal.App.4th 523, 543 (same); see also Sacramento Suncreek Apartments, LLC v. Cambridge Advantaged Properties II, L.P. (2010) 187 Cal.App.4th 1, 14 (affirming order quashing service over foreign defendant where defendant’s sole contact was act of passive investment).)

Kaddu also presents Jean-Luc Cornet’s discovery requests to it, dated January 16, 2015—after the January 8, 2015 filing of the instant motion to quash. “In general, propounding discovery constitutes a general appearance.” (Factor Health Management v. Super. Ct. (Apex Therapeutic Care, Inc.) (2005) 132 Cal.App.4th 246, 250.) However, where the defendant files a motion to quash prior to or concurrently with an act constituting participation in the litigation on the merits, there is no waiver of jurisdictional defects. (See Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2014) ¶ 3:165.1, citing Air Machine Com SRL v. Super. Ct. (Sukumar) (2010) 186 Cal.App.4th 414, 428 (service of 998 offer subsequent to filing of motion to quash does not constitute a general appearance because defendant filed motion to quash prior to offer); also citing Roy v. Super. Ct. (Lucky Star Industries, Inc.) (2005) 127 Cal.App.4th 337, 345 (stating that “a defendant may move to quash coupled with any other action without being deemed to have submitted to the court’s jurisdiction”).)

Accordingly, Jean-Luc Cornet’s motion to quash service of summons is GRANTED. Jean-Luc Cornet’s demurrer to the FAXC is MOOT.

In light of this ruling, all discovery requests served on behalf of Jean-Luc Cornet on Kaddu are moot, and Kaddu is not obligated to serve responses to such discovery. Moreover, Jean-Luc Cornet need not serve responses or further responses to any discovery served on him.

The Sanouillets’ demurrer to the FAXC

The Sanouillets demur to the FAXC on the ground that the third through fifth causes of action fail to state facts sufficient to constitute a claim against them. In opposition, Kaddu asserts that each of its claims is premised on alter ego liability and the FAXC sufficiently alleges sufficient facts to demonstrate alter ego liability. Here, the FAXC alleges that: the Sanouillets invested $115,000 towards the purchase of the subject business; Sandrine “consulted” with them “about all material matters associated with the purchase of the restaurant business”; Sandrine acted in accordance to the Sanouillets’ instructions; Sandrine was authorized to enter into contracts for the purchase of the restaurant business by the Sanouillets; and, the Sanouillets participated in and controlled the negotiations of the contracts. (See FAXC, ¶¶ 51-60.)

Here, these allegations are plainly insufficient to invoke the alter ego doctrine. First, the alter ego doctrine is solely applied when an individual is attempting to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose via use of a corporation, not another individual. (See Sonora Diamond Corp. v. Super. Ct. (Sonora Union High School Dist.) (2000) 83 Cal.App.4th 523, 538.) Regardless, these facts do not support application of the alter ego doctrine. For example, Kaddu does not allege commingling of funds and other assets, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one corporate entity as a mere shell or conduit for the affairs of the other, inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. (Id. at pp.538-539.)

The Sanouillets’ demurrer to the third through fifth causes of action of the FAXC is SUSTAINED with 10 days leave to amend.

In light of this ruling, and on the Court’s own motion, all discovery by the Sanouillets on Kaddu shall be stayed until further order of the Court, to allow the Court time to determine if any valid claims can be alleged against the Sanouillets. Kaddu is not obligated to serve responses to any such discovery until the Court orders otherwise or the parties stipulate in writing.

The Court will prepare the order.

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