Case Name: Steven Kirby v. F & J Precision, Inc.
Case No.: 17-CV-320442

I. Background

According to the allegations in the form complaint, plaintiff Steven Kirby (“Kirby”) “provided funds, purchased equipment, invested, and provided labor in and to” defendant F & J Precision, Inc. (“FJP”). (Compl. at p. 3.) Without elaboration, Kirby states he “has been damaged in the amount of $76,887.63.” (Compl. at p. 3.) He asserts a cause of action for breach of contract and a common count claim against FJP. (Compl. at pp. 3-4.)

FJP filed a cross-complaint alleging Kirby engaged in self-dealing during the parties’ business relationship. FJP is apparently a “metal manufacturing shop.” (Cross-Compl., ¶ 6.) FJP alleges Kirby purchased equipment for the shop costing $33,000 without authorization to do so and “claimed a personal tax deduction” of $5,000 for this equipment. (Cross-Compl., ¶¶ 10-11.) FJP asserts causes of action against Kirby for: (1) breach of fiduciary duty; (2) accounting; (3) breach of the implied covenant of good faith and fair dealing; (4) violation of California’s unfair competition law; and (5) unjust enrichment.

Currently before the Court is Kirby’s demurrer to the first and third causes of action in the cross-complaint. FJP opposes the demurrer and filed a request for judicial notice in support.

II. Request for Judicial Notice

FJP requests judicial notice of its articles of incorporation, which it filed with the California Secretary of State. But FJP does not identify any statutory basis for its request. “Judicial notice may not be taken of any matter unless authorized or required by law.” (Evid. Code, § 450.) The matters of law and fact that are proper subjects of judicial notice are set forth in Evidence Code sections 451 and 452. FJP does not demonstrate and it is not otherwise obvious its articles of incorporation are a proper subject of judicial notice under either of these sections.

Perhaps FJP intended to request judicial notice pursuant to Evidence Code section 452, subdivision (h). Even so, its request would be improper. That particular subdivision authorizes a court to take judicial notice of: “Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” But the mere fact that a document prepared by private parties has been filed with a state agency does not render the document a source of reasonably indisputable accuracy and the facts therein reasonably beyond dispute. (See Hughes v. Blue Cross of N. Cal. (1989) 215 Cal.App.3d 832, 856, fn. 2.)

In conclusion, the Court may not take judicial notice of the articles of incorporation because there is no statutory basis for doing so. FJP’s request for judicial notice is therefore DENIED.
III. Demurrer

A. First Cause of Action

Kirby demurs to the first cause of action for breach of fiduciary duty on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).) He argues FJP fails to state a claim for breach of fiduciary duty because it does not allege the existence of a fiduciary relationship.

Indeed, a plaintiff must allege facts showing the existence of a fiduciary relationship to state a claim for breach of fiduciary duty. (See Meister v. Mensinger (2014) 230 Cal.App.4th 381, 395; see also Gilman v. Dalby (2009) 176 Cal.App.4th 606, 614-15.) “In the commercial context, traditional examples of fiduciary relationships include those of trustee/beneficiary, corporate directors and majority shareholders, business partners, joint adventurers, and agent/principal.” (Gilman, supra, 176 Cal.App.4th at p. 614.)

In the cross-complaint, FJP simply concludes it had a fiduciary relationship with Kirby. But it does not actually allege facts showing the existence of such a relationship, and it is not otherwise obvious which of these traditional examples it is relying on, if any. To the extent FJP intended to rely on the allegation that Kirby was a “33.333% shareholder,” Kirby argues this is insufficient to show the existence of a fiduciary relationship because “minority shareholders do not owe a fiduciary duty to other shareholders.” (Mem. of Pts. & Auth. at p. 3:1-4, citing Cross-Compl., ¶ 7.) Even assuming FJP clearly alleged it had a fiduciary relationship with Kirby based on his status as a “shareholder,” which it does not, it is not apparent Kirby necessarily qualifies as a “minority shareholder.” For example, it is not clear whether Kirby owned shares of stock or something else, such as convertible notes or bonds, which interests are treated differently for purposes of a breach of fiduciary duty claim. (See, e.g., Pittelman v. Pearce (1992) 6 Cal.App.4th 1436, 1442-43.) It is also unclear, without more information about the distribution of the remaining shares, who owns a controlling stake and that Kirby is in the minority. In any event, Kirby does not cite authority that supports the legal premise of his argument. Kirby cites Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, which supports the proposition that “minority shareholders are owed a fiduciary duty by both the corporation and the majority shareholders.” (Pittelman, supra, 6 Cal.App.4th at p. 1442, citing Jones, supra, 1 Cal.3d at pp. 111-12.) But it does not logically follow that minority shareholders do not owe any fiduciary duty. Accordingly, Kirby does not substantiate this particular argument.

In conclusion, FJP fails to allege facts showing the existence of a fiduciary relationship. Kirby’s demurrer to the first cause of action in the cross-complaint is therefore SUSTAINED with 10 days’ leave to amend.

B. Third Cause of Action

Kirby demurs to the third cause of action for breach of the implied covenant of good faith and fair dealing on the ground of failure to state sufficient facts. (Dem. at p. 2:9-13.) But in his memorandum of points and authorities, Kirby argues the Court should sustain the demurrer on a different statutory ground, citing Code of Civil Procedure section 430.10, subdivision (g), which authorizes a demurrer on the ground “it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” In his demurrer, Kirby does not specify the unascertainablity of the form of the contract, (see Code Civ. Proc., § 430.10, subd. (g)), as a ground for his demurrer. Accordingly, the Court will not consider whether a demurrer is sustainable on that particular statutory ground. (See Code Civ. Proc., § 430.60; see also Cal. Rules of Court, rule 3.1320(a).) Incidentally, FJP explicitly alleges there was an implied in fact agreement. (Cross-Compl., ¶¶ 24-28.)

Kirby does not otherwise present any explanation or legal authority to support the conclusion that the demurrer on the ground of failure to state sufficient facts should be sustained. Consequently, Kirby does not substantiate his demurrer on that particular statutory ground.

Kirby’s demurrer to the third cause of action in the cross-complaint is therefore OVERRULED.