Case Name: Tuan Van Nguyen v. Tan Cong Le, et al.

Case No.: 2016-1-CV-293735

Demurrer to the Complaint by Defendant Tan Cong Le

Plaintiff Tuan Van Nguyen (“Nguyen”) is the owner and shareholder of 50% of the common stock of nominal defendant Quality Ceramics Mfg, Inc. (“QCM”). (Complaint, ¶5.) In February 2010, plaintiff Nguyen and defendant Tan Cong Le (“Le”) formed QCM with each owning 50% of the common stock of QCM. (Complaint, ¶11.) Approximately one year prior to the filing of the complaint in this action, defendant Le began using illegal controlled substances. (Complaint, ¶¶14 – 15.) Defendant Le began issuing checks from QCM’s corporate account for personal expenses. On information and belief, Le used corporate funds to pay for illegal drugs. (Complaint, ¶¶16 – 17.)

On March 28, 2016, defendant Le entered QCM offices at night with a female companion and destroyed all the security cameras. (Complaint, ¶18.) On March 29, 2016, QCM received a duplicate payment of $94,572 from a vendor, Intevac. (Complaint, ¶19.) After discovering the duplicate payment, plaintiff Nguyen emailed Intevac and inquired about how to return the duplicate payment. (Complaint, ¶20.) Defendant Le refused to return the duplicate payment and on April 4, 2016, without informing plaintiff, transferred the entire $94,572 from a QCM savings account to his own personal bank account. (Complaint, ¶¶21 – 22.) Plaintiff Nguyen demanded defendant Le return the funds, but defendant Le refused and threatened plaintiff Nguyen’s life. (Complaint, ¶23.)

Defendant Le also threatened QCM employees, unilaterally terminated an integral QCM employee, and wanted to bring in friends to work for QCM without consulting plaintiff. (Complaint, ¶¶24 – 25.) Defendant Le threatened to establish a new company in direct competition with QCM and to dissolve QCM in order to deprive plaintiff Nguyen of his ownership and other rights. (Complaint, ¶29.)

On April 12, 2016, plaintiff Nguyen filed a derivative complaint against defendants Le and QCM asserting causes of action for:

(1) Breach of Fiduciary Duty
(2) Abuse of Control
(3) Conversion
(4) Injunctive Relief
(5) Expulsion
(6) Defamation

On May 18, 2016, defendant Le filed this demurrer to plaintiff Nguyen’s complaint.

On July 1, 2016, plaintiff Nguyen filed opposition.

I. Procedural violation.

As a preliminary matter, the court notes that plaintiff Nguyen’s opposition is untimely filed. Code of Civil Procedure section 1005, subdivision (b) states, “All papers opposing a motion … shall be filed with the court and a copy served on each party at least nine court days … before the hearing.” Based on a hearing date of July 12, 2016, plaintiff’s opposition was due on June 28, 2016. Plaintiff did not file or serve his opposition until July 1, 2016, three court days late.

California Rules of Court, rule 3.1300, subdivision (d) states, “No paper may be rejected for filing on the ground that it was untimely submitted for filing. If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.” Since the court has discretion to consider a late filed paper, since defendant has not shown any real prejudice from the late filing, and to avoid the expenditure of any further judicial resources, the court will look past this procedural deficiency and consider the opposition on its merits. However, plaintiff Nguyen and plaintiff’s counsel are hereby admonished for the procedural violation. Any future violation may result in the court’s refusal to consider the untimely filed papers.

II. Defendant Le’s demurrer to the complaint is SUSTAINED, in part, and OVERRULED, in part.

A. Demand futility.

California Corporations Code section 800, subdivision (b)(2), requires a derivative plaintiff to allege “. . . in the complaint with particularity plaintiff’s efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort . . . .” (See also Shields v. Singleton (1993) 15 Cal.App.4th 1611, 1622 [general, conclusory facts are insufficient to prove demand futility]; Oakland Raiders v. National Football League (2001) 93 Cal.App.4th 572, 587, 589 [“none of the cases cited by the Raiders support that demand futility can be shown by evidence of a structural bias in lieu of facts, specific to each director, from which the trier of fact could conclude that a particular director could or could not be expected to fairly evaluate the claims of the shareholder plaintiff”].)

Defendant Le demurs by arguing that plaintiff’s complaint asserts derivative causes of action and plaintiff has not adequately alleged demand futility as required by Corporations Code section 800, subdivision (b)(2). In opposition, plaintiff contends he is asserting causes of action individually and derivatively but does nothing to explain how the causes of action are individual and not derivative.

Accordingly, defendant Le’s demurrer to plaintiff Nguyen’s complaint on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] is SUSTAINED with 10 days’ leave to amend.

B. Expulsion.

Defendant Le demurs to the fifth cause of action, entitled “Expulsion,” on the basis that there is no such cause of action. In opposition, plaintiff Nguyen concedes the fifth cause of action is not a cause of action, but rather a remedy. Accordingly, defendant Le’s demurrer to the fifth cause of action in plaintiff Nguyen’s complaint on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for expulsion is SUSTAINED WITHOUT LEAVE TO AMEND.

C. Injunctive Relief.

In demurring to the fourth cause of action, defendants essentially argue, “Injunctive relief is a remedy, not a cause of action.” (City of South Pasadena v. Dept. of Transportation (1994) 29 Cal.App.4th 1280, 1293.) “To qualify for a permanent injunction, the plaintiff must prove (1) the elements of a cause of action involving the wrongful act sought to be enjoined and (2) the grounds for equitable relief, such as, inadequacy of the remedy at law.” (Id. at p. 1293; see also 5 Witkin, California Procedure (4th ed. 1997) Pleading, §779, p. 236.) “Injunctive relief is a remedy and not, in itself, a cause of action, and a cause of action must exist before injunctive relief may be granted.” (Shell Oil v. Richter (1942) 52 Cal.App.2d 164, 168.)

In his opposition, plaintiff Nguyen offers no argument or discussion of this point. Accordingly, defendant Le’s demurrer to the fourth cause of action in plaintiff Nguyen’s complaint on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for injunctive relief is SUSTAINED with 10 days’ leave to amend.

D. Defamation.

Finally, defendant Le demurs to the sixth cause of action for defamation by citing to Hecimovich v. Encinal School Parent Teacher Organization (2012) 203 Cal.App.4th 450, 457, fn. 1 where the court quoted Witkin on pleading defamation:

As Witkin distills the pleading rule, “It is sometimes said to be a requirement, and it certainly is the common practice, to plead the exact words or the picture or other defamatory matter. The chief reason appears to be that the court must determine, as a question of law, whether the defamatory matter is on its face or capable of the defamatory meaning attributed to it by the innuendo. Hence, the complaint should set the matter out verbatim, either in the body or as an attached exhibit.” (5 Witkin, Cal. Procedure (5th ed. 2008), Pleading, § 739, p. 159.)

However, this rule applies to libel. “[S]lander can be charged by alleging the substance of the defamatory statement.” (Okun v. Superior Court (1981) 29 Cal.3d 442, 458.) An allegation is not “defective for failure to state the exact words of the alleged slander.” (Ibid.)

“Defamation is effected by either of the following: (a) Libel; (b) Slander.” (Civ. Code §44.) “Libel is a false and unprivileged publication by writing, printing, picture, effigy, or other fixed representation to the eye, which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation.” (Civ. Code §45.) “Slander is a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means which: (1) Charges any person with crime, or with having been indicted, convicted, or punished for crime; (2) Imputes in him the present existence of an infectious, contagious, or loathsome disease; (3) Tends directly to injure him in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits; (4) Imputes to him impotence or a want of chastity; or (5) Which, by natural consequence, causes actual damage.” (Civ. Code §46; emphasis added.)

Here, plaintiff’s sixth cause of action alleges slander. At paragraph 73, plaintiff Nguyen alleges defendant Le “told employees of QCM, Van Pham, the corporate CPA, and other people [in] their circle of friends that Plaintiff embezzled mony [sic] from QCM totaling more than a million dollars in the last 10 years.” (Emphasis added.)

Accordingly, defendant Le’s demurrer to the sixth cause of action in plaintiff Nguyen’s complaint on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for defamation is OVERRULED