Case Number: 19STCP00540 Hearing Date: December 17, 2019 Dept: 34

SUBJECT: Demurrer

Moving Party: Defendant Charles Ebersol

Resp. Party: Plaintiff Robert Vanech

Defendant Charles Ebersol’s demurrer is SUSTAINED without leave to amend.

Defendant Charles Ebersol’s evidentiary objections are SUSTAINED.

PRELIMINARY COMMENTS:

The Court is concerned with the apparent lack of professionalism and clear lack of civility by Plaintiff’s counsel Christopher Gansen, as evidenced in a series of emails to opposing counsel that were attached to the demurrer as Exh. 4.

The emails start with a request by defense counsel, Mr. Saltz, to meet-and-confer regarding the First Amended Complaint:

Mr. Saltz: “Jim: Please call me to discuss our response to the First Amended Complaint. I can be reached today on my cellphone. 310-499-3260.”

Mr. Gansen: “Your client must not be paying his legal bill. Welcome to the club. What is there to possibly discuss? We will simply get a judgment.”

Mr. Saltz: “I am available to discuss your First Amended Complaint anytime today. We intend on filing a Demurrer to it and are instructed to meet and confer beforehand. Should you not wish to meet and confer because such an endeavor is likely futile, then we will just proceed with filing our Demurrer. Please let me know if you wish to waive the meet and confer instruction and proceed accordingly.”

Mr. Gansen: “We look forward to reading your demurrer, and requesting sanctions under sec. 128.7 when it is denied. Fire away. You’re on notice.”

Mr. Saltz: “Thank you. I will take your procedurally improper threat of sanctions as a waiver of the meet and confer process and proceed with our Demurrer.”

Mr. Gansen: We’re going to bankrupt your client. We won’t stop. Enjoy your day.”

The statements of attorney Gansen have no place in the conduct of civil litigation, and are antithetical to the oath that all attorneys take.

The Court reminds defense counsel that the Los Angeles Superior Court, Local Rules, Appendix 3.A: “Guidelines for Civility in Litigation” require that “Counsel should at all times be civil and courteous in communicating with adversaries, whether in writing or orally.” (§D(1).)

“In addition to the language required by Business and Professions Code section 6067, the oath to be taken by every person on admission to practice law is to conclude with the following: ‘As an officer of the court, I will strive to conduct myself at all times with dignity, courtesy and integrity.’ ” (Cal. Rules of Court, rule 9.7.)

“[Z]ealous advocacy . . . does it mean lack of civility. Zeal and vigor in the representation of clients are commendable. So are civility, courtesy, and cooperation. They are not mutually exclusive.” (In re Marriage of Davenport (2011) 194 Cal.App.4th 1507, 1537.)

Almost a decade ago, our Court of Appeal sanctioned a lawyer $10,000.00 for lack of civility. In imposing the sanction, the Court stated,

“For decades, our profession has given lip service to civility. All we have gotten from it is tired lips. We have reluctantly concluded lips cannot do the job; teeth are required. In this case, those teeth will take the form of sanctions.” (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 293.)

At the hearing, defense counsel indicated that there were numerous other abusive emails from plaintiff’s counsel, and that plaintiff’s counsel had sent PhotoShopped and derogatory pictures of Defendant to counsel.

Plaintiff’s counsel apologized at the hearing for his conduct.

The Court need not pursue this issue any further at the present time. This Court sincerely hopes that all counsel will conduct themselves with civility and courtesy – not because of the threat of sanctions, but because it is the right thing to do.

BACKGROUND:

On February 22, 2019, Plaintiff Robert Vanech commenced this action against Charles “Charlie” Ebersol, individually and as a Director and CEO of Legendary Field Exhibitions LLC, Legendary Field Exhibitions LLC d/b/a Alliance of America Football, AAF Properties, LLC, and Ebersol Sports Media Group Inc. for (1) declaratory relief; (2) conversion; (3) breach of fiduciary duty; (4) failure to pay wages in violation of Labor Code section 201, et seq.; (5) violation of California’s unfair competition laws (Business & Professions Code section 17200, et seq.); (6) breach of contract under oral employment agreement and breach of joint venture or breach of partnership agreement; (7) unjust enrichment; (8) intentional misrepresentation and fraud; (9) promissory fraud; and (10) accounting.

Plaintiff “seeks relief, namely for the Court to declare that he owns a 50% equity interest in the AAF and its related entities, that that AAF required his consent to approval the $250,000,000 commitment (whether it was structured as debt, equity or some other combination that materially changed the capitalization table of the AAF), that the AAF publicly acknowledge Vanech’s role in the public narrative as a co-founder of the AAF, that the Court hold Defendants liable for the fraud perpetrated on him by Charlie Ebersol and his co-conspirators, his father, Duncan “Dick” Ebersol, Keith Rabois, Tom Veit, William “Bill” Polian, and for the AAF to pay Vanech for the accrued salary and expenses incurred while performing services in furtherance of the joint venture or partnership that became the AAF, and other compensation promised to Vanech.” (Complaint, ¶ 10.)

On February 22, 2019, Defendant Charles “Charlie” Ebersol filed a notice that Defendant Legendary Field Exhibitions, LLC filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code and notice of automatic stay of proceedings.

On July 15, 2019, the bankruptcy court lifted the automatic stay, in part, finding that the stay is lifted “only as to the direct causes of action against Charles ‘Charlie’ Ebersol, an individual defendant, and that Vanech may exercise any rights and remedies he has under applicable non-bankruptcy law for recovery by settlement or judgment for relief available for the losses sustained by him, only as to those causes of action, Vanech shall not and has no authority to prosecute [the] causes of action that belong to the Bankruptcy Estate including any and all derivative actions in accordance with In Re: Matter of S.I. Acquisition, Inc. 817 F. 2nd 1142 (5th Cir. 1987).” (08/06/19 Joint Status Report, Ex. A.) The bankruptcy court also ordered “that Vanech agrees to amend the complaint in the California Action, 1) dismissing all claims in the California Action against the debtor entities in this matter, 2) dismissing all derivative claims owned by the Debtor entities against Officer and Director of the Debtors and 3) will dismiss his pending claim for a declaration that he owns or owned an alleged 50% interest in one or all of the corporate debtor parties.” (Ibid.)

On September 4, 2019, Plaintiff filed a first amended complaint (“FAC”) against Charles “Charlie” Ebersol for (1) violation of California’s unfair competition laws (Business & Professions Code section 17200, et seq.); (2) breach of contract under oral agreement; (3) unjust enrichment; (4) intentional misrepresentation and fraud; (5) promissory fraud; and (6) services rendered.

Plaintiff alleges “after several corporate defendants of a professional football league filed bankruptcy following the instant lawsuit in which Plaintiff alleged he was a co-founding partner, this case is now based upon breach of pre-incorporation (or pre-formation) agreement for services rendered related to the development of that professional football league business, and Plaintiff alleges his damages are the value of those services at the time the services were performed.” (FAC, ¶ 1.)

On October 15, 2019, Plaintiff filed a request for entry of default, which was rejected by the clerk on October 30, 2019.

On October 15, 2019, Ebersol filed the instant demurrer to the FAC.

ANALYSIS:

A. Evidentiary Objections

In reply, Ebersol submits six evidentiary objections to the declaration of James Bartolomei and four evidentiary objections to the declaration of Casey Clarke. The Court SUSTAINS Ebersol’s objections.

B. Legal Standard

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (Code Civ. Proc., §§422.10, 589.)

Code of Civil Procedure section 430.41(a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc., § 430.41(a)(2).) The demurring party must also file and serve a declaration detailing the meet and confer efforts. (Code Civ. Proc., § 430.41(a)(3).) If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading. (Code Civ. Proc., § 430.41(a).)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under Code of Civil Procedure section 430.10 (grounds), section 430.30 (as to any matter on its face or from which judicial notice may be taken), and section 430.50(a) (can be taken to the entire complaint or any cause of action within).

A demurrer may be brought under Code of Civil Procedure section 430.10(e) if insufficient facts are stated to support the cause of action asserted. A demurrer for uncertainty Code of Civil Procedure section 430.10(f), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

C. Discussion

Ebersol argues that Plaintiff’s FAC is a sham pleading that also violates the Bankruptcy Court’s Order because Plaintiff “attempts to plead around and directly contradict his prior allegations, all without any explanation.” (Demurrer, p. 3:13-15.)

Ebersol also argues that “in addition to the fact that the allegations in the FAC are a sham and cannot be used to state any cause of action, Vanech’s causes of action fail for the following reasons: Vanech’s First Cause of Action from breach of Bus. & Profs. Code [section] 17200 fails to identify any predicate statute that has been violated; Vanech’s Second Cause of Action for breach of contract fails because it is barred by the statute of limitations; Vanech’s Third Cause of Action for Unjust Enrichment fails because it is not a cause of action, and even if it is, it is a derivative action barred by the Bankruptcy Court’s Order; Vanech’s Fourth Cause of Action for Fraud fails because it is not plead with specificity and it is a derivative action barred by the Bankruptcy Court’s Order; Vanech’s Fifth Cause of Action for Promissory Estoppel fails because it is not plead with specificity and it is a derivative action barred by the Bankruptcy Court’s Order; and Vanech’s Sixth Cause of Action for Services Rendered is barred by the statute of limitations.” (Id. at p. 5:5-15.)

At oral argument on the demurrer, both parties’ counsel agreed that it would be inconsistent for the Court to find that the yet find that the fraud causes of action were barred by the Bankruptcy ruling, yet find that the contract causes of action were not barred by the Bankruptcy ruling. More generally, both parties agreed that – at least as far as the determination of whether the Bankruptcy ruling required the Court to sustain the demurrer – it was an “all or nothing” decision. Of course, plaintiff’s counsel argued that the Bankruptcy ruling did not prevent any of Plaintiff’s causes of action while defense counsel argued that the Bankruptcy ruling required the Court to sustain the demurrer as to all causes of action.

1. Meet and Confer Requirement and Timeliness of Demurrer

Ebersol’s counsel asserts that “on Friday October 11, 2019, and again on Tuesday October 15, 2019, [he] attempted to call opposing counsel James Bartolomei at his number of record and left a message with his answering service in order to meet and confer regarding [the] proposed demurrer” and then “sent an email to all of Plaintiff’s counsel asking James Bartolomei to call [him] back.” (Saltz Decl., ¶ 5.) Ebersol’s counsel states that he “received a hostile email back from Plaintiff’s Counsel Christopher Gansen” to which Ebersol’s counsel “invited Mr. Gansen to meet and confer regarding our proposed Demurrer.” (Ibid.) Ebersol’s counsel asserts that “Mr. Gansen refused and threatened to bring a sanctions motion against me for filing a Demurrer” and “then stated ‘We’re going to bankrupt your client. We won’t stop. Enjoy your day.’” (Ibid.; see also Saltz Decl., Ex. 4.)

A defendant must file a demurrer within 30 days of service, unless extended by stipulation or court order. (Code Civ. Proc., § 430.40, subd. (a).) Plaintiff filed the FAC on September 4, 2019, and the proof of service indicates that Defendant was served with the FAC by email and by U.S. Mail from Arkansas. Although 30 days after being served by email on September 4, 2019, would give Defendant until October 5, 2019 to file his demurrer, Defendant relied on the service by mail from Arkansas, and added 10 days pursuant to Code of Civil Procedure section 1005, subdivision (b), to file the demurrer on October 15, 2019.

Defendant was required to meet and confer five days before October 15, 2019, which would be October 10, 2019. Plaintiff’s counsel asserts that he first attempted to meet and confer on October 11, 2019, thus Defendant’s meet and confer efforts would be untimely.

Even though Defendant failed to meet and confer at least 5 days prior to the deadline for filing his demurrer, the Court finds that Defendant attempted to meet and confer in good faith. Any insufficiency in the meet and confer process falls squarely on Plaintiff’s shoulders. (See Preliminary Comments, above.) Further the lack of an adequate meet-and-confer attempt is not grounds to overrule a demurrer. (See Code Civ. Proc., § 430.41(a)(4).)

Accordingly, the Court will consider the merits of the demurrer.

2. First Cause of Action: Violation of Business and Professions Code section 17200

Generally, the Unfair Competition Act defines “unfair competition” broadly to include “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200.) The court in Safeway Inc. v. Superior Court (2015) 238 Cal.App.4th 1138 explains that

“By proscribing ‘any unlawful’ business practice, ‘[the UCL] “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable. [¶] However, the law does more than just borrow. The statutory language referring to “any unlawful, unfair or fraudulent” practice makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law.” (Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (Cel–Tech).) Under the UCL, damages cannot be recovered, and plaintiffs are generally limited to restitution and injunctive relief. (Clark v. Superior Court (2010) 50 Cal.4th 605, 610, 112 Cal.Rptr.3d 876, 235 P.3d 171.)

(Safeway Inc. v. Superior Court (2015) 238 Cal.App.4th 1138, 1147).

An “unfair” business practice occurs when “that practice ‘offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” (Davis v. Ford Motor Credit Co. LLC (2009) 179 Cal. App. 4th 581, 595 [citations omitted].)

Ebersol argues that the first cause of action in the FAC fails to identify any predicate law or statute that has been violated, thus Plaintiff failed to properly allege enough facts to constitute a cause of action for violation of Business and Professions Code section 17200. (Demurrer, p. 9:1-15.)

In opposition, Plaintiff argues that “no such predicate statute is required to be proven, only a violation of public policy.” (Opp., p. 6:20-21.) Plaintiff also argues that he “alleges that he has suffered an economic harm – that is, not getting paid for his services – as a result of Defendant’s unfair business practices.” (Id. at p. 6:27-28.)

In addition to the other allegations mentioned above, the FAC alleges the following:

· “Based on initial conversations, Vanech and Charlie explicitly agreed via a handshake agreement on or about February 16, 2017 that Vanech would be paid for his time, services, and ideas in the development of the league . . . .” (FAC, ¶ 6.)

· “Starting in February 2017, Vanech began devoting as many as 60 hours or more per week in efforts to conceptualize and secure funding for the business, all services which directly benefitted Charlie personally.” (Id. at ¶ 35.)

· “Vanech relied on Charlie’s assurances that he would be paid for the work he was doing.” (Ibid.)

· “The failure to pay Plaintiff all compensation for value of services and expenses incurred due to him constitutes an unlawful, unfair or fraudulent business act or practice, in violation of the California Unfair Competition Law codified at Business and Professions Code §17200 et seq.” (Id. at ¶ 91.)

· “As a service provider and/or independent contractor for Charlie from whom the compensation and expenses were unlawfully denied, Plaintiff is entitled to compensation and restitution of all such unpaid amounts, in an amount according to proof at trial.” (Id. at ¶ 92.)

The Court finds that Plaintiff has sufficiently alleged a violation of Business and Professions Code section 17200 et seq., by alleging that the failure to pay Plaintiff’s wages for his services is an unfair practice that “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” (Davis, 179 Cal. App. 4th at p. 595 [citations omitted].)

However, even if Plaintiff has alleged facts sufficient to constitute a cause of action for a violation of Business and Professions Code section 17200 et seq., the Court finds this cause of action is barred by the Bankruptcy Court’s order, as it is a derivative action under In Re: Matter of S.I. Acquisitions, Inc. (5th Cir. 1987) 817 F.2d 1142. In In Re: Matter of S.I. Acquisitions, Inc., in “keeping in mind the Bankruptcy Code’s general policies of security and preserving the debtor’s property and of ensuring equal distribution of the debtor’s assets to similarly-situated creditors,” the Fifth Circuit held that “a section 362(a)(3) stay applies to a cause of action that seeks to recover property of the estate where the property is held or controlled by a person or entity other than the debtor.” (Id. at p. 1150.) The Fifth Circuit also found that a debtor-“corporation may pierce its own corporate veil and hold accountable those who have misused the corporation in order to meet its corporate obligations,” thus an action against officers may be brought in bankruptcy court proceedings. (Id. at p. 1152.)

The cause of action for a violation of Business and Professions Code section 17200 et seq. is a derivative action because Plaintiff is alleging that the failure to be compensated for his time, services, and ideas solely for the development and launch of the football league, is an unfair practice that falls under Business and Professions Code section 17200 et seq. (See e.g., FAC, ¶¶ 6, 85.) Accepting these allegations as true for the purposes of this demurrer, the bankrupt entities would be able to go after their own corporate officer, Ebersol, to recover any property of the estate affected by the corporate officer’s actions; thus this UCL claim belongs to the football league entities in the bankruptcy court.

The Court SUSTAINS the demurrer without leave to amend as to the first cause of action.

3. Second and Sixth Causes of Action: Breach of Contract and Services Rendered

Ebersol argues that the breach of contract cause of action and services rendered cause of action are barred by the applicable statute of limitations because “the claims based on the newly-alleged oral argument do not relate back.” (Demurrer, p. 9:20-24; 15:17-18.) Ebersol maintains that “the FAC, by its incongruous and contradictory nature, is in fact a separate instrument than that which was alleged in the original complaint” because “the FAC alleges the existence of an entirely different oral contract (i.e. one for monetary compensation regardless of the formation of a partnership) than the oral contract alleged in the original complaint (i.e. one for 50% equity in a partnership to be earned by unpaid ‘sweat equity’).” (Id. at p. 10:12-18 [citing FAC ¶ 6 v. Compl ¶¶ 72-74; FAC ¶ 49 v. Compl. ¶ 56; FAC ¶ 8 v. Compl. ¶ 73; FAC ¶ 64 v. Compl. ¶ 72; FAC ¶ 95 v. Compl. ¶ ¶ 138-139]; see also p. 15:11-17.)

Further, Ebersol maintains that “the injury being alleged in the FAC is completely different than that alleged in the original Complaint” because “the FAC now claims that Ebersol personally agreed to compensate Vanech for his services and expenses regardless of the formation of any partnership” whereas “the original complaint claimed that Vanech’s compensation was an equity interest in the partnership, and that his costs and time would only be reimbursed as a founding partner by the Debtor entities once they were fully funded and were generating revenue.” (Id. at p. 10:19-25 [citing FAC, ¶¶ 6, 49, 64, 95; Complaint, ¶¶72, 73]; see also id. at p. 15:3-6.) Therefore, Ebersol argues, “the original complaint did not put [him] on notice of any claims related to [Mr. Ebersol] personally agreeing to monetarily pay Vanech for his purported services regardless of any outcome.” (Id. at p. 10:26-28.)

The statute of limitations is not an enumerated ground for demurrer; rather, it is an argument that may be advanced in support of a demurrer on the ground of failure to state sufficient facts. (See E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315; see also ABF Capital Corp. v. Berglass (2005) 130 Cal.App.4th 825, 833.) “The defense of statute of limitations may be asserted by general demurrer if the complaint shows on its face that the statute bars the action. There is an important qualification, however: In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315-16 [citations and internal quotations omitted].) A defendant challenging a pleading based on the statute of limitations must demonstrate (1) which statute of limitations applies and (2) when the cause of action accrued. (Id. at p. 1316.)

The relation-back doctrine deems a later-filed pleading to have been filed at the time of an earlier complaint which met the applicable limitations period, thus avoiding the bar. In order for the relation-back doctrine to apply, “the amended complaint must (1) rest on the same general set of facts, (2) involve the same injury, and (3) refer to the same instrumentality, as the original one.” (Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1278 [quoting Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408–409].)

The statute of limitations for a breach of oral contract claim and for services rendered claim is two years. (Code Civ. Proc., § 339(1).) “A cause of action for breach of contract accrues at the time of breach, which then starts the limitations period running.” (Cochran v. Cochran (1997) 56 Cal.App.4th 1115, 1120, as modified Aug. 12, 1997.)

In the FAC, Plaintiff alleges that he entered into the oral agreement for monetary compensation for services on February 16, 2017 (FAC, ¶ 6); he started providing services on February 16, 2017 and February 17, 2017 (id. at ¶¶ 29, 30); and Ebersol never compensated Plaintiff for his services (id. at ¶ 64). As explained above, the allegations in the complaint also relate to services Plaintiff performed pursuant to conversations with Ebersol. For example, the complaint alleged that Plaintiff “and Charlie Ebersol agreed that Vanech would accrue his salary starting in mid-February 2017, and likely Ebersol would begin to go ‘full time’ in August or September 2017 after his wedding in July 2017.” (Complaint, ¶ 75.) Plaintiff served a notice of breach of contract on Ebersol in July 2018, when Ebersol denied compensating Plaintiff for his time and services. (Complaint, ¶ 92; FAC, ¶ 9.)

The complaint was filed on February 22, 2019. Even though Plaintiff filed the FAC on September 4, 2019 after Plaintiff performed services starting in February of 2017 and notice of the breach for failure to be compensated for the services rendered was given in July 2018, the breach of contract and services rendered causes of action relates back to the time of the original complaint, as Ebersol has been on notice of Plaintiff’s claims in the FAC, as they stem from the same general facts and same injury as he was notified of in the complaint. (See Quiroz, 140 Cal.App.4th at 1278.) Accordingly, the Court finds the breach of contract and services rendered claims relates back and thus is not barred by the statute of limitations.

Ebersol also argues that “the cause of action is, on its face, barred by the applicable statute of limitations because Plaintiff would have been fully aware that Mr. Ebersol breached the alleged monetary compensation portion of the alleged oral agreement the very moment he provided services and was not immediately compensated.” (Demurrer, p. 11:24-27.) Ebersol maintains that “as the FAC confirms that uncompensated services were performed well before February 22, 2017, and the statute of limitations for breach of an oral contract is two years, Plaintiff has now confirmed that the filing of the original Complaint was untimely and this cause of action is barred by the statute of limitations under all circumstances.” (Id. at pp. 11:27-12:3.)

The FAC alleges that the last time the Plaintiff performed services that Ebersol benefitted from individually as a promoter of the new football league business was approximately June or July 2017 (see FAC, ¶ 7) but the FAC also alleges that Plaintiff served a demand to Ebersol seeking a remedy from the decision to exclude Plaintiff from receiving payment for his time and services in July 2018 (FAC, ¶ 9). Therefore, the breach of oral contract could have accrued in July of 2018, when Plaintiff was not compensated for his services after making his demand for compensation for the services performed, thus the original complaint was timely filed, based on that date of July 2018. Defendant does not demonstrate the breach of contract claim nor the services rendered claim are affirmatively barred by the statute of limitations on face of the FAC.

However, the Court finds the second and sixth causes of action are barred by the Bankruptcy Court’s order, as they are derivative actions under In Re: Matter of S.I. Acquisitions, Inc. (5th Cir. 1987) 817 F.2d 1142. The breach of contract and services rendered claims are derivative actions of the bankruptcy proceeding because Plaintiff is alleging that the failure to be compensated for his time, services, and ideas solely for the development and launch of the football league, is a breach of the handshake agreement with Ebersol. (See e.g., FAC, ¶¶ 6, 85.) Taking these allegations as true for purposes of this demurrer, the bankrupt entities would be able to go after their own corporate officer, Ebersol, to recover any property of the estate affected by the corporate officer’s actions; thus the breach of contract and services rendered claims belong to the football league entities in the bankruptcy court.

The Court SUSTAINS the demurrer without leave to amend as to the second and sixth causes of action.

4. Third Cause of Action: Unjust Enrichment

There is a split of authority on whether unjust enrichment is a cause of action. “The phrase ‘Unjust Enrichment’ does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.” (Lauriedale Associates, Ltd. v. Wilson (1992) 7 Cal.App.4th 1439, 1448.) “Unjust enrichment is ‘a general principle, underlying various legal doctrines and remedies,’ rather than a remedy itself.” (Melchior v. New Line Cinema (2003) 106 Cal.App.4th 779, 793 [quoting Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1315].)

Still, where it has been held to be a cause of action, “[t]he elements of a cause of action for unjust enrichment are simply stated as ‘receipt of a benefit and unjust retention of the benefit at the expense of another.’ [Citation.] . . . “The term ‘benefit’ ‘denotes any form of advantage.’” [Citation.] “[T]he benefit that is the basis of a restitution claim may take any form, direct or indirect. It may consist of services as well as property. A saved expenditure or a discharged obligation is no less beneficial to the recipient than a direct transfer.” [Citation.]” (Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238.)

Ebersol argues that “since the majority of divisions in the Second District have more recently ruled that there is no such thing as a cause of action for unjust enrichment, this court should sustain this Demurrer as to this cause of action without leave to amend.” (Demurrer, p. 12:6-10.) Even if the Court rules that unjust enrichment is a cause of action, Ebersol argues that “a claim for unjust enrichment in this matter constitutes a derivative action under In Re: Matter of S.I. Acquisitions, Inc. (5th Cir. 1987) 817 F.2d 1142, and is otherwise expressly prohibited from proceeding in this State Court action by way of the Bankruptcy Court’s Order.” (Id. at p. 12:11-15.)

Ebersol argues that the FAC’s allegations that “Mr. Ebersol was unjustly enriched by misappropriating Plaintiff’s work product, and then giving said work product to the Debtor entities in exchange for the benefit of an ownership interest and salary from the Debtor entities . . . constitute a derivative action belonging to the Debtor entities, and therefore must be prosecuted in Bankruptcy Court in Texas.” (Id. at pp. 12:20-13:3 [citing FAC, ¶¶ 87, 88, 102; Complaint, ¶¶ 93, 94, 96, 99, 146].)

The FAC alleges that “Ebersol incorporated many of Vanech’s original ideas (e.g., digital distribution, fantasy integration via a mobile app involving biometrics and next generation data, sourcing of well-known, local players for teams, and a league centered on player safety and fan involvement) into the football league business” and “the AAF was operated by personnel that Vanech personally spent his own funds on recruiting in furtherance of Ebersol’s role as a promoter, such as Tom Veit.” (FAC, ¶ 87.) The FAC states that Ebersol “was unjustly enriched through his misappropriation of Vanech’s trade secrets, valuable advice, and marketing Plan and caused [Ebersol] to receive a benefit that he otherwise would not have achieved.” (FAC, ¶ 102.) The FAC also states that “as a promoter, [Ebersol] benefitted personally to develop and launch the AAF, which is now in bankruptcy proceedings, and that Charlie never compensated Vanech for any of its efforts.” (FAC, ¶ 85.)

Even if Plaintiff has alleged facts sufficient to constitute a cause of action for unjust enrichment, the Court finds this cause of action is barred by the Bankruptcy Court’s order, as it is a derivative action under In Re: Matter of S.I. Acquisitions, Inc. (5th Cir. 1987) 817 F.2d 1142. In In Re: Matter of S.I. Acquisitions, Inc., in “keeping in mind the Bankruptcy Code’s general policies of security and preserving the debtor’s property and of ensuring equal distribution of the debtor’s assets to similarly-situated creditors,” the Fifth Circuit held that “a section 362(a)(3) stay applies to a cause of action that seeks to recover property of the estate where the property is held or controlled by a person or entity other than the debtor.” (Id. at p. 1150.) The Fifth Circuit also found that a debtor “corporation may pierce its own corporate veil and hold accountable those who have misused the corporation in order to meet its corporate obligations,” thus an action against officers may be brought in bankruptcy court proceedings. (Id. at p. 1152.)

The unjust enrichment claim is a derivative action because Plaintiff is alleging that Ebersol personally benefits from misappropriation of Plaintiff’s services in order to operate and launch the football league entities. (See FAC, ¶ 85.) Taking these allegations as true for purposes of this demurrer, the bankrupt entities would be able to go after their own corporate officer, Ebersol, to recover any property of the estate affected by the corporate officer’s actions; thus this unjust enrichment claim belongs to the football league entities in the bankruptcy court.

The Court SUSTAINS the demurrer without leave to amend as to the third cause of action.

5. Fourth and Fifth Causes of Action: Intentional Misrepresentation-Fraud and Promissory Fraud

In order to establish a cause of action for intentional misrepresentation, Plaintiffs must allege (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud or to induce reliance, (4) justifiable reliance, and (5) resulting damage. (See Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974; Chapman v. Skype, Inc. (2013) 220 Cal. App. 4th 217, 230-231 [citing Lazar v. Superior Court (1996) 12 Cal.4th 631, 638].)

A subspecies of an action for fraud includes “promissory fraud.” (Lazar v. Superior Court (1996) 12 Cal. 4th 631, 638.) “A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Id. [citing Union Flower Market, Ltd. v. Southern California Flower Market, Inc. (1938) 10 Cal.2d 671, 676; see Civ.Code, § 1710, subd. (4); 5 Witkin, Summary of Cal.Law, (9th ed. 1988), Torts, § 685, pp. 786–787].)

In California, claims based on fraud must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.” (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) “In order to recover for fraud, as in any other tort, the plaintiff must plead and prove the “detriment proximately caused” by the defendant’s tortious conduct. (Civ. Code, § 3333.) Deception without resulting loss is not actionable fraud. (Hill v. Wrather (1958) 158 Cal.App.2d 818, 825, 323 P.2d 567.) ‘Whatever form it takes, the injury or damage must not only be distinctly alleged but its causal connection with the reliance on the representations must be shown.”’ (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1818.)

Although the general rule states that a fraud claim must be specifically pleaded, less specificity is required if it appears from the nature of allegations that defendant must necessarily possess full information, or if the facts lie more in the knowledge of opposing parties. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384-1385 [“it does not appear necessary to require each of the 38 plaintiffs to allege each occasion on which an agent of either defendant could have disclosed …. Surely defendants have records of their dealings with the plaintiffs”]. Accord Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 931 [“plaintiffs did not have to specify the … personnel who prepared these documents because that information is uniquely within … [defendant’s] knowledge”].) “‘[T]he courts should not … seek to absolve the defendant from liability on highly technical requirements of form in pleading. Pleading facts in ordinary and concise language is as permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases.’” (Appollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 242.)

Furthermore, the rule of specificity of pleading is intended to apply only to affirmative representations and not to fraud by concealment. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384; Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200 [concealment is sufficiently pled when the complaint as a whole provides sufficient notice of the claims against defendants].)

Ebersol argues that “Plaintiff’s Fourth Cause of Action for Fraud, and Fifth Cause of Action for Promissory Fraud, fail to state a cause of action because neither of them are alleged with specificity, and because they likewise constitute[] derivative actions.” (Demurrer, p. 13:9-11.) Specifically, Ebersol asserts that “Plaintiff fails to plead exactly what it was that Mr. Ebersol said about monetary compensation” and “there is no allegation as to the exact words that were used or the details of the promise, including the rate and timing of payment.” (Id. at p. 13:20-22.) Ebersol also argues that if the allegations “that Mr. Ebersol misappropriated through fraud Plaintiff’s work product, and then gave said work product to the Debtor entities in exchange for the benefit of an ownership interest and a salary from the Debtor entities” are true, “they constitute a derivative action belonging to the Debtor entities, as well as impugn the provenance of the property in the Bankruptcy Estate, and therefore must be prosecuted in the Bankruptcy Court in Texas.” (Id. at p. 14:11-17 [citing FAC, ¶¶ 87, 88, 102, 106, 115, 116; Complaint, ¶¶ 93, 94, 96, 99, 146, 151, 158, 159, 160].)

The FAC contains the allegations that:

· “Based on the initial conversations, Vanech and [Ebersol] explicitly agreed via a handshake agreement on or about February 16, 2017 that Vanech would be paid for his time, services, and ideas, in the development of the league and that he would receive an equity interest in the new league.” (FAC, ¶ 6.)

· Ebersol “and Vanech met at [Ebersol’s] Beverly Hills office on or about February 16, 2017. At that critical meeting, Vanech was led to believe that [Ebersol] agreed that they would eb equal, 50-50% equity owners in a new league and that Vanech would separately be paid his work to develop the business.” (FAC, ¶ 28.)

· Ebersol’s agreement with Vanech was “that Vanech would begin earning compensation from the start of the development of the league of $500,000 per year.” (FAC, ¶ 8.)

· “Charlie made promises to Vanech, Vanech relied on those promises causing him to continue to perform services, and as a promoter, Charlie benefitted personally to develop and launch the AAF, which is now in bankruptcy proceedings, and that Charlie never compensated Vanech for any of his efforts.” (FAC, ¶ 85.)

· “In addition to the fact that Ebersol incorporated many of Vanech’s original ideas (e.g., digital distribution, fantasy integration via a mobile app involving biometrics and next generation data, sourcing of well-known, local players for teams, and a league centered on player safety and fan involvement) into the football league business, the AAF was operated by personnel that Vanech personally spent his own funds on recruiting in furtherance of Ebersol’s role as a promoter, such as Tom Veit.” (FAC, ¶ 87.)

· “Further misrepresentations in the media provided corroboration that Vanech’s technology ideas and developed trade secrets were taken by [Ebersol], which he personally benefitted from, taking in over $300,000 in fees and compensation and other benefits such as reimbursement of expenses he incurred. These articles include a series of medium.com articles written by Eric Schwartz and interviews wherein [Ebersol] described ‘his’ ideas for using ‘big data’ to monetize aspects of analytic data collected during play and through fan interaction, which was at all times Vanech’s idea, which were shared with [Ebersol] as a promoter, as well as Basil DeVito, Ken Schanzer, Dick Ebersol, and Tom Veit.” (FAC, ¶ 88.)

· “Ebersol represented to Plaintiff that he agreed to compensate Plaintiff for his services.” (FAC, ¶ 108.)

· “Defendant Charlie Ebersol made a representation orally, in writing, or by non-verbal conduct such as Ebersol’s acts while acting on behalf of all Defendants.” (FAC, ¶ 112.)

· Ebersol “made a promise to Plaintiff Vanech, that this promise was important to the transaction (compensation for services related to the development of a new football league); [Ebersol] did not intend to perform this promise when made; [Ebersol] did not perform the promised act of compensating Vanech; Vanech was harmed; and Vanech’s reliance on [Ebersol’s] promise was a substantial factor causing the harm.” (FAC, ¶ 115.)

· Ebersol “engaged in promissory fraud, otherwise known as promissory estoppel when he promised to compensate Vanech for his time and services, yet never intended to fulfill that promise.” (FAC, ¶ 116.)

The Court finds that Plaintiff has sufficiently alleged causes of action for intentional misrepresentation-fraud and promissory fraud, with the requisite specificity as Plaintiff has plead that Ebersol would pay Plaintiff compensation for his services.

However, the Court finds that these causes of action are derivative actions of the bankruptcy proceedings, as these claims affect the property of the debtor entities’ Bankruptcy Estate because Plaintiff alleges that the representations, made by Ebersol as promoter of the new football league, was for compensation for services related to the development of a new football league and important to the transaction as a whole. (E.g., FAC, ¶¶ 112, 115, 116.) Taking these allegations as true for purposes of this demurrer, the bankrupt entities would be able to go after its own corporate officer, Ebersol, to recover any property of the estate affected by the corporate officer’s actions; thus the fraud claims belong to the football league entities in the bankruptcy court.

The Court SUSTAINS the demurrer without leave to amend as to the fourth and fifth causes of action.

6. Sham Pleading

Ebersol also argues that Plaintiff’s FAC is a sham pleading. (Demurrer, p. 3:13-15.)

Generally, the sham pleading doctrine prohibits a plaintiff from amending a complaint to omit harmful allegations from prior pleadings, without explanation. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) Under the sham pleading doctrine, “[a] plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict facts pleaded in the original complaint, or by suppressing facts which prove the pleaded facts false.” (Cantu v. Resolution Trust Corporation (1992) 4 Cal.App.4th 857, 877-878.) Where an amended complaint omits harmful allegations without explanation, the Court may take judicial notice of the prior pleadings and disregard any inconsistent allegations in the amended pleading. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.) The sham pleading doctrine is not intended to prevent honest complainants from correcting erroneous allegations or to prevent correction of ambiguous facts. (Ibid.) Instead, it is intended to enable courts “ ‘to prevent an abuse of process.’ ” (Amid v. Hawthorne Community Medical Group, Inc. (1989) 212 Cal.App.3d 1383, 1390-1391.)

As the Court is sustaining the demurrer without leave to amend because the causes of action are derivative actions of the bankruptcy court proceedings, the Court need not determine if the sham pleading doctrine applies to the FAC.

The Court notes, however, that during oral argument Plaintiff requested leave to amend if the Court were to sustain the demurrer. However, as discussed at the hearing, any further amendments in a Second Amended Complaint would lend weight to Defendant’s argument that the amended complaint is a sham pleading.