2009-00055591-CU-BT

The TDS Group Inc vs. The IRA Center

Nature of Proceeding: Demurrer to Holt and Wickers Amended Cross-Complaint (IRA Center)

Filed By: Dillingham, Michael

*** If oral argument is requested, the parties must at the time oral argument is
requested notify the clerk and opposing counsel of the causes of action that will
be addressed at the hearing. Counsel are also reminded that pursuant to local
court rules, only limited oral argument is permitted on law and motion matters.
***

Defendants/cross-defendants EBSG Legacy Assets Corporation (fka The IRA Center,
Inc.), Rene Rocamora, Rebecca Olsen and Randy Scianna’s (collectively “IRA
Defendants”) demurrer to Loy Douglas Holt and Alonzo Wickers’ (collectively “Holt-
Wickers”) First Amended Cross-Complaint (“1ACC”) is SUSTAINED in part and
OVERRULED in part, with leave to amend, as follows.

Although the notice of hearing provided notice of the Court’s tentative ruling system as
required by Local Rule 1.06(D), the notice does not comply with that rule. Moving
counsel is directed to review the Local Rules, effective 1/1/2013.

This action commenced in August 2009 with a complaint by Plaintiff TDS Group, Inc.
(“TDS”), whose former principals are Holt-Wickers. TDS was a plan administrator for
public school districts and related entities in connection with their 457 and 403(b)
plans. TDS entered into agreements with various entities and individuals to act as
TDS’s representatives and were licensed to use TDS’ trademarks, trade name, logos,
and service mark. TDS’ Fourth Amended Complaint alleges that: (1) IRA Defendants
continued to use TDS’ trademarks beyond the scope of their franchise agreement; (2) representing that TDS was experiencing financial and regulatory troubles; (3)
defendants Pension Planners Securities, Inc., Gina Dureya, BAR Financial, LLC,
Anthony Tarantino, John Bracket, Eric A. Huck (collectively “BAR Defendants”)
wrongfully withheld or delayed the “block transfer” of accounts; and (4) various
defendants shorted TDS and thus its principals, Holt-Wickers, of commissions.

In November 2009, IRA Defendants filed a cross-complaint naming Holt-Wickers as
cross-defendants and the latter responded with a cross-complaint of their own in
January 2010. After several demurrers to the Holt-Wicker’s cross-complaint were
sustained, the 1ACC was filed and its causes of action (“COA”) are now being
challenged by several cross-defendants on several grounds. Holt-Wickers oppose.

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1 COA for “Accounting and Disgorgement.” IRA Defendants demur to this COA
arguing that the 1ACC fails to allege the existence of a fiduciary relationship or any
term in a contract with these demurring defendants which gives rise to any right
belonging to Holt-Wickers for an accounting. Instead, according to IRA Defendants,
this COA essentially relies on the same allegations which were found in the prior cross
-complaint, to which several demurrers were sustained. IRA Defendants further assert
this COA is deficient in that relies on TDS’ assignment of rights to Holt-Wickers but the
allegations relating to this purported assignment are insufficient in several respects.

In opposition, Holt-Wickers insists an accounting is available where there is a fiduciary
relationship or other circumstances making the remedy appropriate, such as when the
accounts are so complicated that an ordinary legal action demanding a fixed sum is
impracticable, or where there is a balance due to the plaintiff which can only be
ascertained through an accounting. The opposition maintains that the Commission
Override Agreements are so complicated that an accounting is appropriate.
Additionally, Holt-Wickers contend the 1ACC sufficiently pleads a contractual
relationship with IRA Defendants inasmuch as the 1ACC alleges (1) Holt-Wickers are
specifically identified as parties to certain contracts, (2) Holt-Wickers are the assignees
of TDS’ rights under the Commission Override Agreements and (3) Holt-Wickers are
intended third party beneficiaries of agreements made by IRA Defendants. (Oppos.,
p.6:1-14.)

This Court previously held that where no fiduciary relationship is alleged, this COA for
accounting requires Holt-Wickers either to attach a contract between themselves and
the IRA Defendants or otherwise sufficiently plead that the IRA Defendants owed
some contractual obligation which warrants an accounting. While the Court is not
persuaded by Holt-Wickers’ suggestion that they are personally identified as parties to
any of the contracts attached to the 1ACC and/or that they are intended third party
beneficiaries of any agreement otherwise alleged in the 1ACC, the allegations in
Paragraphs 74 et seq. that TDS’ rights under the Franchise Agreement attached to the
1ACC as Exhibit D were assigned to Holt-Wickers personally are sufficient to establish
a contractual basis for this COA at least as against the IRA Center, Inc. (nka EBSG
Legacy Assets Corporation). However, the same is not true with respect to the other
parties demurring here since these individuals are not sufficiently alleged to be parties
to any contract purportedly assigned to Holt-Wickers. Finally, the requirements the
IRA Defendants cite in connection with these assignment allegations do not appear to
be pleading requirements but rather factual matters which must ultimately be shown by
Holt-Wickers in order to obtain the equitable relief sought here. Accordingly, the
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demurrer to the 1 COA is overruled as to IRA Center, Inc./EBSG Legacy Assets
Corporation but sustained as to the other demurring cross-defendants. 2nd COA for “Money Had & Received.” IRA Defendants first contend that this COA
exceeds the scope of the Court’s prior order sustaining the demurrer to the 2nd COA
for “Written Book Account” with leave to amend and that this COA is defective because
the contracts on which it is allegedly based do not involve Holt-Wickers, Rocamora,
Olsen or Scianna and because it relies on insufficient allegations of TDS’ assignment
of rights to Holt-Wickers. IRA Defendants also argue this COA impermissibly includes
a claim for punitive damages.

The opposition counters that this COA is under California precedent a viable means to
recover commissions due but not paid and that this COA specifically alleges that all
cross-defendants, including Rocamora, Olsen and Scianna failed to pay Holt-Wickers
the commission overrides to which they are entitled.

The demurrer to the 2nd COA is overruled because, although Rocamora, Olsen and
Scianna were themselves not parties to any contract with TDS or Holt-Wickers, the
latter have pled in Paragraph 119-120 that each of the cross-defendants (including
Rocamora, Olsen and Scianna) received commission override moneys due to Holt-
Wickers and that they have failed to turn the moneys over to Holt-Wickers. This is a
sufficient basis for this common count claim and while the punitive damages claim in
Paragraph 122 is clearly inappropriate for this 2nd COA, the inclusion of these improper
damages is not a valid ground for demurring.

3rd COA for “Violation of Business & Professions Code §17200 et seq. IRA
Defendants demur to this COA because it remains uncertain as to their alleged actions
and because it not only continues to impermissibly seek lost profits but also now seeks
an accounting.

In opposition, Holt-Wickers argue that demurrers for uncertainty are disfavored and
that this COA specifically alleges in Paragraph 128 [sic] the wrongful conduct on which
this COA is based (i.e., “writing away from the Holt/Wickers commission override
income structures,” “shorting of commissions” and “affirmatively concealing such
wrongful conduct by submitting false and misleading information of the sales of the
securities and insurance products…”).

The demurrer to this COA is sustained because it remains uncertain as to the actions
of the IRA Defendants. The Court finds in this COA no discernible or other meaningful
substantive change from the 3rd COA in the prior cross-complaint and thus, it suffers
from the same infirmities as before. Under California law, statutory claims such as this
under §17200 must “be pleaded with particularity,” meaning specific facts necessary to
establish each element of the statute. (See, e.g., Carter v. Prime Healthcare Paradise
Valley LLC (2011) 198 Cal.App.4th 396, 407 [citing Covenant Care, Inc. v. Superior
Court (2004) 32 Cal.4th 771, 790].) However, the cross-defendants’ objection to Holt-
Wickers’ inclusion of claims for lost profits and an accounting is not a valid basis for a
demurrer.

4th COA for “Breach Of Obligations Founded On Written Contracts As To Which
Holt/Wickers Are Parties Or Third-Party Beneficiaries.” The demurrer asserts that
this COA is hopelessly uncertain in that includes at least 17 misjoined putative claims
against different parties since the Commission Override Agreements are defined in
Paragraph 34 of the 1ACC to include 17 categories of agreements. Additionally, IRA
Defendants claim there are no properly pled contracts between themselves and Holt-
Wickers and thus, this COA fails to sufficiently plead either the terms of such
agreements or the facts constituting a material breach of each agreement.

The opposition maintains that the 1ACC specifically establishes three (3) different
grounds on which there is contractual privity between Holt-Wickers and the cross-
defendants being sued here: (1) Holt-Wickers are specifically named as parties to
certain agreements, (2) Holt-Wickers are assignees of TDS’ Commission Override
Agreements and (3) Holt-Wickers are intended third party beneficiaries to the
agreements by IRA Defendants.

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The demurrer to the 4 COA is sustained in part. As discussed above in connection
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with the 1 COA, the 1ACC sufficiently alleges in Paragraphs 74 et seq. that TDS’
rights under the Franchise Agreement attached to the 1ACC as Exhibit D were
assigned to Holt-Wickers personally and thus, the Court finds adequate contractual
privity between Holt-Wickers and the IRA Center, Inc./EBSG Legacy Assets itself but
this is not true with respect to any other cross-defendants demurring here since the
Court finds no properly pled contract with any of them individually. Although Exhibit F
to the 1ACC is an “Agent Agreement” to which both TDS and the IRA Center, Inc. are
parties, the Court finds no provision which permits TDS to assign its rights under this
agreement; even if it did, the Court finds no allegation that TDS’ rights were duly
assigned to Holt-Wickers; and even if it did, the Court finds in this agreement no
obligations relating to the payment of commission override moneys to Holt-Wickers.
To the extent this COA also purports to plead the existence of some other contract
and/or contractual obligations owed by any of the IRA Defendants, it is deficient
because none of the other agreements identified in Paragraph 128 appear to include
any of the IRA Defendants as a signatory. (See, Ex. E, G & H.) Additionally,
Paragraph 129 does not plead facts sufficient to establish a material breach of either
the Franchise Agreement with the IRA Center, Inc. or any other purported agreement
with the IRA Defendants. (See, Levy v. State Farm Mut. Auto. Ins. Co. (2007) 150
Cal.App.4th 1, 5 [breach of contract must be pleaded with factual specificity which
affirmatively demonstrates breach of a material contract term].) Finally, inasmuch as
this single COA attempts to assert the breach of various contracts with multiple parties,
it is needlessly uncertain and ambiguous.

5th COA for “Equitable Indemnity.” IRA Defendants demur to this COA because the
1ACC contains no allegations specifically relating to cross-defendant Scianna.

The opposition asserts, as the Court previously noted, that the question of whether
cross-defendant Scianna is joint tortfeasor obligated to indemnify Holt-Wickers is a
question of fact which cannot be resolved on demurrer.

Although the 1ACC and this COA if particular could have been better pled, the Court
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overrules the demurrer to the 5 COA because it states facts sufficient to constitute a
claim for equitable indemnity against Scianna.

Leave to amend is granted as the Court is not persuaded that Holt-Wickers will be
unable to cure the above deficiencies.

Where leave to amend is granted, Holt-Wickers may file and serve a second amended
cross-complaint no later than 11/22/2013. Although not required by court rule or
statute, cross-complainants are directed to present a copy of this order when
the amended cross-complaint is presented for filing.
Cross-defendants to respond within 20 days if the amended cross-complaint is
personally served, 25 days if served by mail. If any cross-defendant intends to demur
to the amended cross-complaint or move to strike, it shall determine if any other cross-
defendant who has appeared in this action also intends to demur or move to strike. If
so, all such cross-defendants shall coordinate a single hearing date for the demurrers
and motions to strike. Additionally, a copy of the amended cross-complaint shall be
included with the moving papers.

This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. §1019.5; CRC Rule 3.1312.)