Case Name: Reynders v. Everest Transfer International, Inc.
Case No.: 1-14-CV-261848
According to the allegations of the first amended cross-complaint (“FAXC”), in August 2013, Timothy Reynders (“Reynders”) promised Everest Transfer International, Inc.’s (“Everest”) CEO Sree Tangella that he would persuade investors and potential investors to invest in Everest and promptly provide them the information they needed to commit an investment. (See FAXC, ¶10.) On September 30, 2013, Reynders represented to Everest’s board that he would provide information to investor Bay Capital India and complete negotiations with Bay Capital India to close the seed round of investment. (See FAXC, ¶ 11.) On October 2, 2013, Reynders represented that he would finish the documentation for setting up Everest and the documentation for Bay Capital India’s investment in Everest by the end of October, and based on these representations, he was offered the opportunity to purchase stock in Everest. (See FAXC, ¶¶ 12-13.) However, Reynders intentionally delayed and failed to perform these tasks so he could present Bay Capital India and other investors with other investment opportunities, and dissuaded Bay Capital India from investing in Everest by failing to provide the necessary documentation to complete its investment in Everest and promoting an alternative investment. (See FAXC, ¶¶ 15-18.) Reynders also failed to disclose his prior business dealings with convicted criminals to the Everest board—a material breach of his fiduciary duties considering the highly regulated nature of Everest’s domestic and international money transfer industry, and also took unilateral control of Everest’s bank account without the knowledge of his fellow board members. (See FAXC, ¶¶ 20-22.) On June 23, 2014, Everest filed the FAXC against Reynders, asserting causes of action for: breach of fiduciary duty; fraud; constructive fraud; intentional interference with prospective economic advantage; negligent interference with prospective economic advantage; and, rescission. Reynders demurs to the second through sixth causes of action on the ground that they fail to state facts sufficient to constitute a cause of action and also demurs to the second and third causes of action for fraud on the ground that they are not pled with the requisite particularity.
Reynders first argues that the FAXC’s allegations with regards to Reynders’ alleged prior dealings with convicted criminals are not alleged with the requisiste particularity for a concealment claim as it does not allege the nature of the alleged dealings with convicted criminals, when those dealings occurred, what the criminals were convicted of, whether Reynders was aware that the people with whom he was dealing were convicted criminals, or specifics as to Everest’s damages. However, Everest is not required to allege every single detail with regards to the claim. (See Charpentier v. L.A. Rams Football Co. (1999) 75 Cal.App.4th 301, 312 (stating that “Defendant cannot persuasively complain it misunderstands the fraud claim made here… [i]f, as it complains, it is confused as to who made the representations and by what means, a little discovery should clear that up”; also stating that the “particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered”) (emphasis added).) Here, Everest has sufficiently alleged facts to support a concealment cause of action sufficient to apprise Reynders of certain definite accusations against him so that he can intelligently respond to them. (See Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850 (stating that “the elements of a cause of action for fraud based on concealment are: ‘(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage’”); see Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216-217 (stating that the specificity requirement is in part, to provide “notice to the defendant, to ‘furnish the defendant with certain definite charges which can be intelligently met’”).) The demurrer to the second cause of action on this ground is without merit.
Reynders also demurs to the second cause of action to the extent that it relates to the alleged delay in raising capital for Everest, arguing that the FAXC does not sufficiently allege causation of damages with particularity. However, as previously stated, the first cause of action already alleges facts sufficient to constitute a cause of action for concealment, and Reynders may not demur to a portion of a cause of action. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 (stating that “a demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy”).) Accordingly, the demurrer to the second cause of action is OVERRULED in its entirety.
Reynders argues that “the Third Cause of Action for constructive fraud relies on allegations largely identical to those forming the basis for its Second Cause of Action… [and thus asserts that f]or the reasons stated above, those allegations do not meet the requirement that fraud be pleaded with particularity.” (See Reynders’ memorandum of points and authorities in support of demurrer, p.8:16-20.) As the Court has already determined that the second cause of action sufficiently alleges facts with particularity, Reynders’ argument with regard to the third cause of action likewise lacks merit, and the demurrer to the third cause of action for constructive fraud is OVERRULED.
Reynders demurs to the fourth and fifth causes of action for intentional and negligent interference with prospective economic advantage, arguing that a mere delay in investment between Everest and Bay Capital India does not constitute an actual disruption. In support of his assertion, Reynders cites to SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68. However, that case in inapposite: there, the court stated that the plaintiff’s only economic opportunity that could have been disrupted were the subject of claims that were withdrawn. (Id. at p.93 (stating “[t]he only time plaintiff was precluded from any economic opportunity was when he wished to buy a mobilehome from one tenant and replace it with another in the hopes that he could sell a mobilehome to another tenant, or model… [h]owever, plaintiff has withdrawn all claims that he should be able to model mobilehomes in Parklane”).) Here, as Reynders concedes, the fourth and fifth causes of action arise from the alleged delay in investment of Everest by Bay Capital India, caused by him. Reynders also cites to a federal case, Silicon Knights v. Crystal Dynamics (N.D. Cal. 1997) 983 F. Supp. 1303; however, that case too is unhelpful. There, the Northern District stated that “the complaint fails to assert facts sufficient to support a claim for intentional interference with prospective economic relationship with Activision since there is no factual allegation in the complaint that Silicon Knights’ relationship with Activision was actually disrupted as a result of Crystal Dynamics and Individual Defendants’ acts. Neither Silicon Knights nor SC Manufactured Homes suggests that a defendant who owes a fiduciary duty to a company, and knows of a specific economic relationship between that company and a third party investor, who then—in breach of his fiduciary duty and promises to the contrary—intentionally causes the delay of investment by that third party, has not “actually disrupted” the relationship between the third party and the company to which he owes that fiduciary duty. The demurrer to the fourth and fifth causes of action is OVERRULED.
Reynders’ argument regarding the sixth cause of action primarily relies on his arguments as to the fraud claims. For reasons already stated, those arguments are without merit. Reynders also asserts that the misrepresentation that he would persuade investors to invest in Everest lacks causation, given that the FAXC also alleges that he actually bought stock in August 2013, and is a representation regarding a future act. However, as previously stated, Reynders may not demur to a portion of a cause of action. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 (stating that “a demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy”).) Accordingly, the demurrer to the sixth cause of action is OVERRULED.
The Court shall prepare the order.
The parties are reminded of their case management conference on October 21, 2014 at 10 a.m.
Link to this page