Case Name: Aemetis, Inc. v. Edeniq, Inc., et al.

Case No.: 16CV299385

(1) Third Eye Capital Corporation’s Motion for Summary Judgment, or Alternatively, Summary Adjudication of Defendant and Cross-Complainant, Edeniq, Inc.’s Second Amended Cross-Complaint Against Third Eye
(2) Third Eye Capital’s Motion to Seal Third Eye’s Motion for Summary Judgment
(3) Motion for Sanctions Against Plaintiff Aemetis and its Attorneys Pursuant to Code of Civil Procedure Sections 128.7 and 128.5
(4) Defendant and Cross-Complainant Edeniq, Inc. and Defendant Brian D. Thome’s Motion for Summary Judgment

Factual and Procedural Background

Third Amended Complaint

EdenIQ, Inc. (“EdenIQ”) a privately held company, invented or exclusively licensed two potentially valuable technologies to convert corn fiber into cellulosic ethanol. (Third Amended Complaint (“TAC”), ¶8.) EdenIQ raised more than $60 million in venture capital funding from investors including Angeleno Group, LLC which was founded and operated by defendant Daniel Weiss (“Weiss”). (TAC, ¶9.) Weiss also served on EdenIQ’s board of directors, finance committee, and compensation committee. (TAC, ¶4.)

EdenIQ sought approval of its Pathway Technology from the Environmental Protection Agency (“EPA”) for use at the Pacific Ethanol (“Pacific”) corn ethanol plant in Stockton, California. (TAC, ¶12.) However, EdenIQ and its CEO, defendant Brian D. Thome (“Thome”), lacked experience and expertise with the EPA application process. (TAC, ¶11.) As a result, EdenIQ’s first petition for EPA approval was rejected for lack of the requisite standing. (TAC, ¶¶12 – 13.)

EdenIQ began the EPA approval process over with Pacific who had the requisite standing because it owned and operated an ethanol production plant. (TAC, ¶16.) The EPA viewed Pathway Technology as suspect due to a series of prior biodiesel industry frauds. (TAC, ¶17.)

Plaintiff Aemetis, Inc. (“Aemetis”) is a publicly traded industrial biotechnology company producing renewable chemicals and fuels using patented microbes and processes. (TAC, ¶1.) Aemetis’s CEO, Eric McAfee (“McAfee”), had established business, political and industry connections in the clean biofuel industry and a positive working relationship with the EPA. (TAC, ¶19.)

Throughout the winter and spring of 2016, EdenIQ ran out of money to operate the company. (TAC, ¶18.) In or around January 2016, EdenIQ’s investment banker contacted Aemetis’s lead investor, Third Eye Capital, regarding the potential funding of EdenIQ by Aemetis. (TAC, ¶20.) Knowing Aemetis and McAfee could assist in the EPA process, EdenIQ (led by Thome and Weiss) entered into negotiations for Aemetis to acquire EdenIQ. (TAC, ¶22.)

On or about April 29, 2016, Aemetis and EdenIQ entered into a written Merger Agreement whereby Aemetis agreed to acquire EdenIQ in exchange for shares of Aemetis common stock and cash. (TAC, ¶26.) The parties entered into a First Amendment to Agreement and Plan of Merger (“First Amendment”) on June 10, 2016 and a Second Amendment to Agreement and Plan of Merger (“Second Amendment”) on June 30, 2016. (TAC, ¶27.)

The Merger Agreement required EdenIQ to obtain from its approximately 130 shareholders a Stock/Cash Election Payment Spreadsheet to be delivered to Aemetis two days prior to closing advising whether each of the shareholders anted stock or cash as payment. (TAC, ¶29.) The Merger Agreement included a No Shop/No Talk clause requiring EdenIQ to refrain from discussing alternatives to the Merger Agreement with third parties.

Aemetis was able and prepared fully to perform all obligations after June 28, 2016. (TAC, ¶38.)

After execution of the Merger Agreement and at the request and authorization of EdenIQ and Pacific, McAfee contacted the Fuels Compliance department of the EPA to determine when review of EdenIQ/Pacific’s application for use of the Pathway Technology would occur. (TAC, ¶39.) McAfee was told there were “hundreds of applications” pending and EPA review of EdenIQ/Pacific’s application might take up to three years and there was an expectation the application “may never be approved.” (Id.) The EPA indicated that the core issue was a concern that EdenIQ would not be truthful in filing for D3 Renewable Identification Numbers (“RINs”), thereby repeating the extensive fraud found in the biodiesel industry. (TAC, ¶40.) Since EdenIQ did not own a production facility, there would be no assets to offset losses from any fraudulent issuance of RINs. (Id.)

During the negotiation of the Merger Agreement, EdenIQ repeatedly represented EPA approval was imminent so Aemetis and McAfee were highly concerned about the EPA’s position. (Id.) Using a combination of political, legal, business and scientific effort, McAfee changed the structure of the business arrangement between EdenIQ and Pacific to create joint and several liability for the issuance of RINs. (TAC, ¶¶41 and 45.) McAfee differentiated EdenIQ’s Pathway Technology from other methods of producing highly valuable cellulosic ethanol. (Id.) McAfee promptly and systematically responded to EPA concerns by remaining in direct and consistent contact with numerous EPA representatives. (TAC, ¶42.) McAfee informed the EPA that Aemetis had signed and fully performed under its acquisition agreement so that EPA could enforce any liability against Aemetis, a company with $150 million in revenue and $40 million of positive cash flow in 2014. (TAC, ¶43.)

On June 8, 2016, the EPA accepted McAfee’s proposals and amendments to the EdenIQ/Pacific application and McAfee emailed EdenIQ/Pacific executives, operating management, and scientific staff that the EPA had agreed to issue approval based upon the filing of certain data and reviews which should not take more than two months to complete. (TAC, ¶46.)

Upon receipt of this communication, EdenIQ proceeded in bad faith under the Merger Agreement. (TAC, ¶48.) EdenIQ realized EPA approval was likely and regretted the terms under which it signed the Merger Agreement. (TAC, ¶49.) After signing the Merger Agreement and while McAfee was negotiating with the EPA for approval, EdenIQ began to secretly negotiate with Trinity Capital Investment (“Trinity”) to cancel the Merger Agreement and enter into a more lucrative agreement with Trinity. (TAC, ¶50.)

On June 9, 2016, only one day after McAfee gave notice of the EPA’s conditional approval, EdenIQ received and accepted a written alternative business proposal from Trinity in violation of the No Shop/No Talk clause of the Merger Agreement. (TAC, ¶52.) EdenIQ used the proposed alternative deal it received from Trinity as leverage against Aemetis by threatening to pursue this alternative arrangement with Trinity if Aemetis did not renegotiate the terms of the Merger Agreement. (TAC, ¶53.)

EdenIQ, Thome, and Weiss discussed and devised a plan to obtain an amendment to the Merger Agreement which would allow EdenIQ to negotiate a Plan B with Trinity under the guise of further debt management by leading McAfee and Aemetis to believe the Merger Agreement was secure so that McAfee would continue to assist EdenIQ and Pacific in the EPA application approval process. (TAC, ¶55.) Between June 9 and June 30, 2016, EdenIQ and Trinity exchanged cash forecasts and cap tables. (TAC, ¶56.) Thome and Weiss advised and instructed the entire EdenIQ board of directors of their Plan B option with Trinity. (TAC, ¶57.) The EdenIQ board of directors condoned and encouraged the intentional violation of the Merger Agreement under the direction of Thome and Weiss. (TAC, ¶58.) Under the direction of Thome and Weiss, the EdenIQ board of directors discussed and devised strategies to circumvent the Merger Agreement to the detriment of Aemetis. (Id.)

While McAfee continued to negotiate and manage the EPA approval process, EdenIQ, Thome, and Weiss continued to encourage the EdenIQ board of directors to vote to terminate the Merger Agreement in favor of a new funding agreement with Trinity while intentionally misleading McAfee to believe that EdenIQ would consummate the deal with Aemetis in order to secure McAfee’s ongoing assistance with the EPA. (TAC, ¶¶66 – 67.)

Through McAfee’s diligent efforts, EPA approval was obtained in late August 2016 and delivered by the EPA via computer entry into the RIN trading exchange in early September 2016. (TAC, ¶68.) Upon news of EPA’s approval of Pathway Technology, the EdenIQ board of directors voted to terminate the merger with Aemetis in favor of proceeding under a new agreement with Trinity. (TAC, ¶69.) On August 29, 2016, EdenIQ sent Aemetis notice of termination of the Merger Agreement. (TAC, ¶70.)

Plaintiff Aemetis filed the operative TAC on June 19, 2018 asserting causes of action for:

(1) Specific Performance of Written Contract (Provision 1.3) [versus EdenIQ]
(2) Specific Performance of Written Contract (Provision 4.1) [versus EdenIQ]
(3) Breach of the Implied Covenant of Good Faith and Fair Dealing (Breach of Provision 4.1 in the Alternative) [versus EdenIQ]
(4) Conspiracy to Commit Fraud [versus EdenIQ, Thome, and Weiss]
(5) Fraud [versus EdenIQ, Thome, and Weiss]

On July 20, 2018, defendant Weiss filed a demurrer to the fourth and fifth causes of action of the TAC. Also on July 20, 2018, defendants EdenIQ and Thome filed a demurrer to the second through fifth causes of action.

On August 16, 2018, the court sustained defendant Weiss’s demurrer to the fourth cause of action without leave to amend and to the fifth cause of action with leave to amend. The court sustained defendants EdenIQ and Thome’s demurrer to the third and fourth causes of action without leave to amend, but overruled their demurrer to the second and fifth causes of action.

On September 4, 2018, defendants EdenIQ and Thome filed an answer to the TAC.

On September 5, 2018, the court issued an order, pursuant to an ex-parte application, dismissing defendant Weiss with prejudice.

On September 13, 2018, defendants EdenIQ and Thome filed one of the four motions now before the court, a motion for summary judgment/ adjudication of the remaining first, second, and fifth causes of action in plaintiff Aemetis’s TAC.

On October 30, 2018, plaintiff Aemetis dismissed the second cause of action of the TAC as to defendant EdenIQ.

Second Amended Cross-Complaint

According to the allegations in the second amended cross-complaint (“SAXC”), EdenIQ and Aemetis contemplated a merger. Aemetis represented that, as a public company in the ethanol industry, it could provide the support, financial wherewithal, and infrastructure EdenIQ needed to realize its technologies. (SAXC, ¶7.) Aemetis would acquire cutting-edge technologies to use in its own plants and license to other ethanol producers. (SAXC, ¶8.) The agreed upon purchase price of $22 million was a bargain for Aemetis in view of the upside potential. (Id.) Aemetis kept the purchase price low by insisting the price reflected the risk it would assume: that EdenIQ’s technology would not receive necessary regulatory approval or adoption in the marketplace. (Id.) Aemetis also structured payout of the purchase price, with the majority to be paid in future years, to reflect such risk. (Id.) Nevertheless, EdenIQ insisted on an upfront cash payment of $8.5 million to pay down EdenIQ’s debts. (SAXC, ¶9.) Aemetis did not have these funds immediately available, so the Merger Agreement required, as a condition precedent, that Aemetis obtain financing from its largest debt provider, Third Eye Capital Corporation (“Third Eye”) or another source to provide the $8.5 million cash payment at closing. (Id.) Aemetis never told EdenIQ that, contrary to its promises, Aemetis would be unable to finance the merger unless and until the EPA approved EdenIQ’s technologies because Third Eye was unwilling to commit funding until EPA approval was certain. (SAXC, ¶10.) Aemetis and Third Eye concealed this fact from EdenIQ throughout the merger negotiations and due diligence process and even after the Merger Agreement was signed. (Id.)

In December 2015, EdenIQ submitted certain technology for approval by the Environmental Protection Agency (“EPA”). (SAXC, ¶22.) By February 2016, McAfee communicated Aemetis’s interest in acquiring EdenIQ. (SAXC, ¶26.) McAfee realized EdenIQ was running out of funding and needed capital to remain operational. (Id.) McAfee also knew acquiring EdenIQ before the EPA granted approval would allow Aemetis to get much better terms in a merger agreement. (Id.) In negotiating with EdenIQ, Aemetis played up the fact that EPA approval may take years in order to lower the purchase price. (SAXC, ¶¶26 – 27.) In contrast, McAfee represented to Aemetis’s largest debt provider, Third Eye, that EPA approval was imminent because McAfee knew that Third Eye would not provide the necessary funding to close the merger until the EPA approved EdenIQ’s EPA application. (SAXC, ¶28.) Third Eye actively engaged in the merger negotiations, providing feedback for specific provisions of the Merger Agreement and demanding access to information EdenIQ made available to Aemetis. (Id.)

Third Eye’s CEO and Managing Director, Arif Bhalwani, spoke directly to EdenIQ CEO, Thome, and EdenIQ CFO, Lily Wachter, on April 20, 2016, prior to the signing of the Merger Agreement, and expressly stated that Third Eye contemplated a four to six week timeline for financing, but never once mentioned that financing was contingent upon EPA approval. (SAXC, ¶¶28 – 29.)

Negotiations between the parties continued until April 29, 2016 when the parties executed the Merger Agreement. (SAXC, ¶32.) Section 5.2 of the Merger Agreement lays out conditions precedent to EdenIQ’s obligations to consummate the merger. (SAXC, ¶33.) One condition precedent was Aemetis’s delivery of “a commitment for financing sufficient to fund the payments described herein and due at Closing” to EdenIQ, including the $8.5 million cash payment to pay down EdenIQ’s debts. (SAXC, ¶33.) Section 8.1(d) of the Merger Agreement provided that either Aemetis or EdenIQ could terminate the Merger Agreement if the transactions contemplated therein were not consummated by the “Termination Date.” (SAXC, ¶32.) The Termination Date was originally set for May 31, 2016. (SAXC, ¶34.) Unable to obtain a commitment for financing, Aemetis postponed the Termination Date to June 30, 2016. (SAXC, ¶34.)

On June 16, Thome spoke to McAfee about the progress of Aemetis’s financing. (SAXC, ¶35.) McAfee promised Aemetis would be able to close by month end and noted he was exploring alternative funding due to delays by Third Eye. (Id.) Thome asked McAfee directly if Aemetis’s ability to secure financing from Third Eye was contingent upon EPA approval, but McAfee deliberately and falsely assured Thome it was not. (SAXC, ¶36.) Third Eye never informed Thome that its willingness to provide financing was contingent upon EPA approval. (Id.)

On June 28, EdenIQ received a letter from Third Eye stating it was “not a final term sheet” and also laying out four prerequisite conditions to be met before Third Eye could provide a final commitment. (SAXC, ¶37.) EPA approval was not one of the prerequisite conditions stated and Third Eye’s letter contained no mention of EPA approval or that Third Eye was unwilling to finance the merger unless the EPA first approved EdenIQ’s application. (Id.) The Third Eye letter also stated its approval to finance the proposed merger would expire on July 15 if the conditions were not met. (SAXC, ¶38.)

The day before the June 30 Termination Date, McAfee wrote to Thome stating Aemetis’s funding was delayed yet again but that Aemetis anticipated it would have the required funding by July 22. (SAXC, ¶39.) McAfee explained Aemetis was currently precluded from borrowing from Third Eye because it had exceeded its loan-to-value ratio on an unrelated Keyes loan. (Id.) Aemetis had to pay down approximately $5 million on its Keyes loan before Aemetis could obtain any additional funding from Third Eye. (Id.) McAfee’s June 29 email went on to imply that Third Eye expected EPA approval prior to the end of May 2016 which raised serious concerns at EdenIQ that Aemetis would not be able to secure the required financing unless and until EPA approval was issued. (SAXC, ¶40.) EdenIQ was in dire financial straits and could not wait until such approval was received. (Id.)

On a June 30 telephone call, Thome implored McAfee to be candid about whether Third Eye’s commitment to fund was conditioned upon EPA approval. (SAXC, ¶41.) McAfee explicitly denied funding was contingent upon EPA approval. (Id.) Relying on these representations and representations made in Third Eye’s letter, Thome agreed to a further amendment to the Merger Agreement, extending the Termination Date to July 22. (Id.)

Edeniq worked diligently to finalize the documents required for closing. (SAXC, ¶¶43 – 47.) On the Termination Date, July 22, and without any forewarning, Aemetis’s counsel sent Thome a letter demanding another extension of the Termination Date and baselessly accusing EdenIQ of willfully failing to fulfill five of its obligations under the Merger Agreement, later dropping four of the five asserted bases for claiming a breach. (SAXC, ¶¶48 – 50.) Thome spoke to McAfee shortly after receiving the letter alleging a breach and McAfee explained the letter was crafted to prevent EdenIQ from terminating and admitted, for the first time, that Aemetis’s inability to fund the merger was due to lack of EPA approval. (SAXC, ¶52.)

By this time, EdenIQ did not have enough capital on hand to make its next payroll and was days away from shutting its doors for good. (SAXC, ¶53.) EdenIQ contemplated a proposal which would extend the Termination Date to September 30, 2016, but ultimately rejected the proposal. (SAXC, ¶¶53 – 56.) On August 29, 2016, EdenIQ properly terminated the merger. (SAXC, ¶56.) Thereafter, Aemetis and McAfee took steps to interfere with EdenIQ’s relationships with its investors and customers and threatened to force it into bankruptcy. (SAXC, ¶¶57 – 62.) Despite disparaging EdenIQ’s reputation, Aemetis still displays EdenIQ’s registered trademark on Aemetis’s homepage. (SAXC, ¶63.)

Based on these allegations, the operative SAXC filed on December 21, 2017 asserts causes of action for:

(1) Fraud/ Equitable Rescission
(2) Negligent Misrepresentation
(3) Intentional Interference with Contractual Relations
(4) Intentional Interference with Prospective Economic Advantage
(5) Lanham Act – Unfair Competition and False Designation of Origin – 15 U.S.C. §1125(a)
(6) Unfair Competition

On January 22, 2018, cross-defendant Third Eye filed its answer to EdenIQ’s SAXC. On January 23, 2018, Aemetis filed its answer to EdenIQ’s SAXC.

On September 13, 2018, cross-defendant Third Eye Capital Corporation (“Third Eye”) filed two of the motions now before the court, a motion for summary judgment of EdenIQ’s second amended cross-complaint and a motion to seal.

On October 31, 2018, defendant EdenIQ filed the fourth motion now before the court, a motion for sanctions against plaintiff Aemetis and its attorneys pursuant to Code of Civil Procedure sections 128.7 and 128.5.

I. Defendants EdenIQ and Thome’s motion for summary judgment/ adjudication of plaintiff Aemetis’s TAC.

As a result of this court’s August 16, 2018 ruling on defendants’ demurrers and the subsequent dismissals, the only remaining causes of action in plaintiff Aemetis’s TAC are the first and fifth causes of action.

A. Defendant EdenIQ’s motion for summary adjudication of the first cause of action [specific performance – breach of contract provision 1.3(c) of the merger] of plaintiff Aemetis’s TAC is GRANTED.

In relevant part, the TAC alleges:

Pursuant to Section 1.3(c)(i) of the Merger Agreement, in order for Plaintiff to deliver the closing consideration in the form of stock certificates, EdenIQ was required to deliver to Plaintiff a document setting forth, among other things, the individual amounts of “Cash Election Consideration” and “Stock Election Consideration” elected by each EdenIQ stockholder no less than two business days prior to the closing of the merger (the “Payment Spreadsheet”). The Payment Spreadsheet delivered by EdenIQ on or about July 20, 2016 failed to fulfill this obligation, as it did not provide individual amounts of Stock Election Consideration or Cash Election Consideration elected by each EdenIQ shareholder to be received by each respective holder of EdenIQ stock (the “Holders”) as required by Section 1.3(c)(i) of the Merger Agreement. Further, the incomplete Payment Spreadsheet delivered by EdenIQ on or about July 20, 2016, prevented Aemetis from performing under Provision 1.5(b) of the Merger Agreement which was predicated upon the receipt of a complete Payment Spreadsheet from EdenIQ and exposed Aemetis to liability as the shareholders whose election was not properly conveyed.

On information and belief, EdenIQ never satisfied its obligation to even request that the Holders provide such election of stock and cash. On July 22, 2016, Plaintiff’s legal counsel issued a letter to EdenIQ stating that EdenIQ was in breach of the Merger Agreement and describing the failure to seek and deliver the stockholder stock/cash election two days prior to closing of the merger transaction.

(TAC, ¶¶74 – 75.)

In moving for summary adjudication of this first cause of action, defendant EdenIQ raises several arguments. The court does not need to address all of the arguments since it finds one argument to be compelling. Specifically, the court is persuaded by defendant EdenIQ’s argument that plaintiff Aemetis failed to perform a condition precedent and, therefore, EdenIQ’s obligation to provide a Payment Spreadsheet did not arise.

To understand Aemetis’s first cause of action, the parties direct the court’s attention to certain sections of the Merger Agreement. Aemetis claims EdenIQ prevented Aemetis from performing section 1.5(b) of the Merger Agreement which stated, in part, “At the Closing, Aemetis shall deliver the following: (i) to the Holders who elect to receive Election Consideration in the form of Stock Election Consideration, the Stock Election Consideration, in the individual amounts set forth in the Payment Spreadsheet[;]. (ii) to the Holders, the Stock Consideration, in the individual amounts set forth in the Payment Spreadsheet[;] (iii) to EdenIQ’s operating account, for further distribution to the payees set forth on the Payment Spreadsheet …, a payment in the aggregate amount of indebtedness owed by EdenIQ to such payees.” Without the Payment Spreadsheet, Aemetis contends it could not perform its obligation under section 1.5(b) which, in essence, sets forth Aemetis’s obligation to pay. In this first cause of action, Aemetis contends EdenIQ breached its obligation to provide the Payment Spreadsheet which is set forth in the following sections of the Merger Agreement.

Section 1.3(a) of the Merger Agreement states, in relevant part, “The consideration payable by Aemetis under this Agreement shall be paid by Aemetis at Closing … and in the form of (i) Stock Consideration; (ii) Election Consideration; (iii) Cash Consideration; and (iv) the Earnout Bonus.”

Section 1.3(c) of the Merger Agreement goes on to define “Election Consideration.” “The Election Consideration means and refers to a combination of One Million shares of Aemetis common stock (the “Stock Election Consideration”) and Two Million Dollars ($2,000,000) in cash (the “Cash Election Consideration”) a pro rata portion of either one of which shall be payable to each Holder, at such Holder’s election, in the individual amounts set forth in a spreadsheet to be delivered by EdenIQ to Aemetis not less than two business days prior to the Closing (the “Payment Spreadsheet”)….” (Emphasis added.)

Section 1.4 of the Merger Agreement is entitled, “Closing,” and states, in relevant part, “In the absence of a prior termination of this Agreement by one of the Parties in accordance with Article 8, the closing (the “Closing”) of the Merger and other transactions contemplated hereby, including the delivery and execution of the closing deliverables set forth in this Agreement (the “Transactions”) shall take place at the Cupertino, California offices of Aemetis, commencing 9:00 a.m., local time, on or before the fifth (5th) business day after the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions, or such other date and time as the Parties may mutually determine (the “Closing Date”).”

In moving for summary adjudication, EdenIQ focuses on section 5.2(c) of the Merger Agreement which provides, “The obligations of EdenIQ to consummate the Merger and the Transactions shall be subject to the following conditions precedent: … Aemetis shall have delivered to EdenIQ a commitment for financing sufficient to fund the payments described herein and due at Closing.”

“A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed.” (Civ. Code, §1436.) “Before any party to an obligation can require another party to perform any act under it, he must fulfill all conditions precedent thereto imposed upon himself.” (Civ. Code, §1439.) “A plaintiff, however, cannot enforce the defendant’s obligation unless the plaintiff has performed the conditions precedent imposed upon him.” (Daum v. Superior Court (1964) 228 Cal.App.2d 283, 287 citing Civ. Code, §1439; see also Alki Partners, LP v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574, 592—“A party’s failure to perform a condition precedent will preclude an action for breach of contract.”)

Here, the Merger Agreement expressly states that as a condition precedent to EdenIQ’s obligation to consummate the Merger and the Transactions, “Aemetis shall have delivered to EdenIQ a commitment for financing sufficient to fund the payments described herein and due at Closing.” EdenIQ proffers evidence that Aemetis did not perform this condition precedent because Aemetis did not deliver to EdenIQ a commitment for financing the requisite payments, primarily the funds necessary for EdenIQ to pay off its debts.

In opposition, Aemetis disputes the relevance of some of EdenIQ’s evidence , but otherwise does not dispute much of the evidence proffered by EdenIQ. Aemetis’s argument appears to be that the condition precedent (delivery of financing commitment) can be performed at any time prior to the consummation of the Merger, even as little as 30 seconds before closing. This argument misses EdenIQ’s point. It is of no consequence that Aemetis could have performed the condition precedent. The undisputed facts are that Aemetis did not actually perform the condition precedent.

Aemetis argues additionally that the Merger Agreement contained reciprocal conditions precedent. While section 5.2 of the Merger Agreement imposed conditions precedent upon Aemetis, section 5.1 of the Merger Agreement imposed conditions precedent upon EdenIQ. Aemetis suggests the result is a “stand-off” in which neither party must perform until the other performs. Indeed, this is a potential result of a contract with conditions precedent placed on both parties. However, the result here is not a “stand-off” as Aemetis suggests. Instead, if neither party fulfills the conditions precedent placed upon them, the result is that neither party may assert a breach of the contract. The above cited legal authorities make clear that in order for Aemetis to assert breach of contract against EdenIQ, Aemetis must be able to prove that it performed any conditions precedent placed upon it. EdenIQ, in moving for summary adjudication of this cause of action, has met its burden of demonstrating that Aemetis has not performed a condition precedent. Aemetis does not proffer any admissible evidence in opposition which would present a triable issue of material fact.

Consequently, defendant EdenIQ’s motion for summary adjudication of the first cause of action of plaintiff Aemetis’s TAC is GRANTED.

B. Defendants EdenIQ and Thome’s motion for summary adjudication of the fifth cause of action [fraud] of plaintiff Aemetis’s TAC is GRANTED.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar).) “Fraud actions are subject to strict requirements of particularity in pleading. … Accordingly, the rule is everywhere followed that fraud must be specifically pleaded.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) “The pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.” (Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 518.) The Lazar court did not comment on how these particular allegations met the requirement of pleading with specificity in a fraud action, but the court did say that “this particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ A plaintiff’s burden in asserting a claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Lazar, supra, 12 Cal.4th at p. 645.)

The court begins the analysis of the fifth cause of action with the observation that plaintiff Aemetis’s pleading of fraud is not a model of clarity. As indicated in this court’s August 16, 2018 ruling with regard to defendants’ demurrer, the TAC purports to assert fraud based upon acts of both affirmative misrepresentation and concealment. Indeed, the court ruled that the TAC did not plead with sufficient specificity any affirmative misrepresentations, but relaxed the pleading requirement insofar as the TAC asserted fraudulent concealment. For that reason, the court determined that the TAC survived defendants’ demurrer.

In moving for summary adjudication, identifies three purported bases of fraud. One basis for fraud is defendant EdenIQ and Thome’s misrepresentation concerning the status of EPA approval as being imminent. Defendants contend this purported basis for fraud fails, regardless of whether defendants actually made such a representation, because plaintiff Aemetis did not rely on this statement. Defendants proffer evidence that McAfee communicated with the EPA directly and through those communications recognized EPA approval was not imminent and could “take up to a year for EPA approval. Maybe two years. Or three.” Plaintiff does not dispute these facts nor offer any opposition on this point.

Defendants continue by arguing that another one of plaintiff Aemetis’s bases for fraud is the assertion that defendants misled plaintiff Aemetis into believing the merger would occur. In moving for summary adjudication, defendants argue that, to the extent such fraud is based on any affirmative misrepresentations, the court has already ruled (in ruling on the demurrer) that plaintiff has not sufficiently alleged any affirmative misrepresentations. However, the court overruled defendants EdenIQ and Thome’s demurrer on the basis that fraud based on concealment did not require the same level of specificity.

This leads to defendants’ third argument which is that to the extent plaintiff Aemetis’s fraud cause of action is based on alleged concealment by EdenIQ to enter into an agreement with Trinity, the claim fails because this fact was not concealed from Aemetis. Defendants proffer evidence that while it did receive a June 9, 2016 email from Alex Erhart at Trinity Capital Investment inquiring about EdenIQ’s interest in an alternative to the Merger Agreement, Thome forwarded that email from Trinity to McAfee within one hour of receiving it. Five days later on June 14, 2016, Thome informed McAfee that EdenIQ intended to pursue alternative financing if the Aemetis merger did not close by June 30, 2016. Moreover, the parties amended the Merger Agreement to specifically allow EdenIQ to pursue an alternative transaction.

In opposition, plaintiff Aemetis questions the propriety of citing to the ruling on the demurrer, but does not assert or provide any evidence of any affirmative misrepresentations. Plaintiff Aemetis continues to focus on defendant EdenIQ’s failure to provide the Payment Spreadsheet as evidence that EdenIQ did not have any intent to perform. The court does not find this to be relevant to the issues raised by defendants in moving for summary adjudication of the fraud cause of action. Nonperformance would be relevant to a claim for promissory fraud, but that is not the type of fraud being asserted here. More importantly, plaintiff Aemetis has not clearly identified nor submitted any evidence that any material fact was misrepresented or concealed.

Accordingly, defendants EdenIQ and Thome’s motion for summary adjudication of the fifth cause of action of plaintiff Aemetis’s TAC is GRANTED. Consequently, defendants EdenIQ and Thome’s motion for summary judgment of plaintiff Aemetis’s TAC is GRANTED.

II. Defendant EdenIQ’s motion for sanctions against plaintiff Aemetis and its attorneys pursuant to Code of Civil Procedure sections 128.7 and 128.5.

A. Code of Civil Procedure section 128.5.

Code of Civil Procedure section 128.5 states, in relevant part:

(a) A trial court may order a party, the party’s attorney, or both, to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay. This section also applies to judicial arbitration proceedings under Chapter 2.5 (commencing with Section 1141.10) of Title 3 of Part 3.
(b) For purposes of this section:
(1) “Actions or tactics” include, but are not limited to, the making or opposing of motions or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading. The mere filing of a complaint without service thereof on an opposing party does not constitute “actions or tactics” for purposes of this section.
(2) “Frivolous” means totally and completely without merit or for the sole purpose of harassing an opposing party.

1. Actions/tactics – safe harbor provision.

Code of Civil Procedure section 128.5 applies to “actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.” If the “actions or tactics” at issue involve “the making or opposing of a written motion or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading that can be withdrawn or appropriately corrected,” a safe-harbor provision applies. “[A] notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court, unless 21 days after service of the motion or any other period as the court may prescribe, the challenged action or tactic is not withdrawn or appropriately corrected.” (Code Civ. Proc., §128.5, subd. (f)(1)(B).)

Defendant EdenIQ complains about a number of “actions or tactics” by plaintiff Aemetis, but one such “action or tactic” involves the filing and service of the TAC. As such, defendant EdenIQ must first comply with the safe harbor provision. In opposition, plaintiff Aemetis argues, preliminarily, that defendant EdenIQ did not strictly comply with the safe harbor provision which requires a “notice of motion” to be served “as provided in Section 1010 .” According to plaintiff Aemetis, defendant EdenIQ served only a memorandum of points and authorities and a supporting declaration, but did not actually serve a notice of motion. The court finds defendant EdenIQ substantially complied with the safe harbor provision and any defect does not serve as a basis for refusing to consider the merits of defendant EdenIQ’s motion.

2. Separate motion.

“A motion for sanctions under this section shall be made separately from other motions or requests and shall describe the specific alleged action or tactic, made in bad faith, that is frivolous or solely intended to cause unnecessary delay.” (Code Civ. Proc., §128.5, subd. (f)(1)(A).)

Plaintiff Aemetis contends defendant EdenIQ’s motion violates the above provision because the motion for sanctions is, in reality, a companion motion to its motion for summary judgment. Plaintiff Aemetis argues additionally that this motion exceeds the already extended page limitations granted by this court on September 5, 2018 with regard to defendant EdenIQ’s motion for summary judgment. The court rejects both of the Plaintiff’s arguments.

3. Frivolous.

The motion for sanctions “shall describe the specific alleged action or tactic, made in bad faith, that is frivolous or solely intended to cause unnecessary delay.” EdenIQ identifies a number of actions or tactics including the filing of the original complaint, the filing of the second amended complaint, postponing the mediation, engaging in a campaign of abusive discovery, filing of a third amended complaint, failing to preserve relevant documents, deposing EdenIQ board members for multiple days, making allegations which are inconsistent with evidence, etc.

As plaintiff Aemetis points out in opposition, it has already dismissed the second cause of action from its TAC. In addition, plaintiff Aemetis notes that section 128.5 “shall not apply to disclosures and discovery requests, responses, objections, and motions.” (Code Civ. Proc., §128.5, subd. (e).) Even so, EdenIQ offers evidence that Aemetis instituted this lawsuit for improper purposes. Plaintiff Aemetis argues in opposition that any comments attributable to McAfee were made out of frustration from having devoted “countless hours … to obtain EPA approval,” only to have the Merger Agreement “wrongfully terminated.” The court is not persuaded by this explanation. Nevertheless, while there appears to be some improper motivation, the court does not find the actions/tactics to be “frivolous” as that terms is defined.

B. Code of Civil Procedure section 128.7

Code of Civil Procedure section 128.7 states, in relevant part:

(b) By presenting to the court, whether by signing, filing, submitting, or later advocating, a pleading, petition, written notice of motion, or other similar paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met:
(1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
(2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.
(3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.
(4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.
(c) If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence.

EdenIQ contends Aemetis and/or Aemetis’s counsel violated section 128.7, subdivision (b) when it included allegations in the TAC that EdenIQ misled Aemetis about the imminence of EPA approval despite the existence of an email that McAfee had, with EdenIQ’s consent, contacted the EPA and learned otherwise. “A sanction imposed for violation of subdivision (b) shall be limited to what is sufficient to deter repetition of this conduct or comparable conduct by others similarly situated.” (Code Civ. Proc., §128.7, subd. (d).) In light of the court’s ruling with regard to defendants’ motion for summary judgment, the court does not find the imposition of any further sanction necessary.

EdenIQ contends further that Aemetis and/or Aemetis’s counsel violated section 128.7, subdivision (b) by alleging defendants defrauded plaintiff into amending the Merger Agreement. In view of Aemetis’s dismissal of the second cause of action and in view of the court’s ruling with regard to defendants’ motion for summary judgment, the court does not find the imposition of any further sanction necessary.

Accordingly, defendant EdenIQ’s motion for sanctions against plaintiff Aemetis and its attorneys pursuant to Code of Civil Procedure section 128.7 and 128.5 is DENIED.

III. Cross-defendant Third Eye’s motion for summary judgment/adjudication of EdenIQ’s SAXC.

In the first cause of action of the SAXC for fraud/equitable rescission, EdenIQ alleges, in part, “Aemetis and Third Eye fraudulently induced Edeniq to enter into the Merger Agreement by actively concealing material information before (and for many months after) the Agreement was signed. Namely, … Third Eye concealed that it would not commit to finance the merger unless and until EPA approval related to Edeniq’s technologies was obtained and instead represented to Edeniq that it could and would obtain financing to consummate the merger notwithstanding approval.” (SAXC, ¶69.) Third Eye was “aware of their falsity because Aemetis later disclosed to Edeniq that financing was contingent on EPA approval.” (SAXC, ¶70.) “If Edeniq had known that … Third Eye would stall the merger until the EPA approved pending applications, Edeniq never would have entered into the Merger Agreement.” (SAXC, ¶72.)

In the second cause of action of the SAXC for negligent misrepresentation, EdenIQ alleges, in part, “Third Eye omitted from Edeniq that Third Eye’s financing was contingent on EPA approval related to Edeniq’s technologies. [¶] Third Eye misrepresented the time frame during which it would fund the merger. On April 20, 2016, Third Eye represented to Edeniq that it contemplated a four to six week timeline for financing. Third Eye did not have reasonable grounds for believing this representation was true.” (SAXC, ¶79.) “If Edeniq had known that Third Eye would be unable to finance the merger in the four to six week timeline it represented or that Third Eye … would stall the merger until the EPA approved pending applications, Edeniq never would have entered into the Merger Agreement.” (SAXC, ¶82.)

A. Representation that financing would be provided.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar, supra, 12 Cal.4th at p. 638.)

“Negligent misrepresentation is a form of deceit, the elements of which consist of (1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5) damages.” (Fox v. Pollack (1986) 181 Cal.App.3d 954, 962; internal citation omitted; see also CACI, No. 1903.)

In moving for summary judgment, Third Eye argues first that the first and second causes of action fail because Third Eye made no representation that it would finance the merger at all, let alone make a representation that it would finance a merger contingent upon EPA approval. Third Eye proffers evidence that it did not talk to EdenIQ about the merger until “a less than 20-minute long call with Arif Bhalwani (“Bhalwani”), the CEO of Third Eye, on April 20, 2016, while he was in between meetings in New York.” During the call of April 20, 2016, Bhalwani informed EdenIQ that Third Eye had not approved the financing and that he needed time to look at the deal. As of the April 20, 2016, call, Third Eye had not yet reviewed financing for this merger.

In opposition, EdenIQ proffers evidence which would present a triable issue of material fact. Specifically, on the April 20, 2016 call, Bhalwani told Thome that Third Eye “contemplated a four-to-six-week timeline for funding a merger” between Edeniq and Aemetis. Thome and Lily Wachter (“Wachter”), Edeniq’s CFO, testified that Third Eye represented to them on the April 20, 2016 call that Third Eye could fund and close the merger in four to six weeks. Thome testified that Third Eye’s representation that it could fund the merger in four to six weeks “meshed up well” with the May 31, 2016 Termination Date that was in the draft Merger Agreement.

B. EPA approval as a condition of financing.

Third Eye argues next that EPA approval was never a condition of financing. The parties did not discuss the issue of EPA approval of Edeniq’s Pathway Technology during the April 20, 2016 call. At no time did Third Eye ever make EPA approval of Edeniq’s pathway technology a condition of closing. Third Eye had not even discussed the issue of EPA approval until May 9, 2016, during due diligence, when Third Eye made the determination to not make EPA approval a condition of financing the Aemetis Merger as “no reasonable seller would accept the condition.” Instead, Third Eye determined that, if it decided to fund the merger, EPA approval would be a post-closing covenant and not a pre-closing condition.

In opposition, EdenIQ contends there is evidence that Third Eye indicated to Aemetis, but not EdenIQ, that Third Eye needed confirmation of EPA approval to suggest that EPA approval was indeed a condition of funding for Third Eye. (See EdenIQ SS, Additional Material Fact Nos. 58, and 60 – 62.) However, these facts do not create a triable issue of material fact because the facts that EdenIQ rely upon occur in May, June, and September 2016, after EdenIQ already entered into the Merger Agreement. The allegation in the first cause of action is that EdenIQ would not have entered into the Merger Agreement if it knew that this financing contingency existed. Third Eye’s evidence is that this was not a condition and was not even discussed until May 9, 2016, after EdenIQ entered into the Merger Agreement on April 29, 2016.

Accordingly, cross-defendant Third Eye’s alternative motion for summary adjudication of the first cause of action in cross-complainant EdenIQ’s SAXC is GRANTED.

EdenIQ’s second cause of action is also based, in part, upon an allegation that “Third Eye omitted from Edeniq that Third Eye’s financing was contingent on EPA approval related to Edeniq’s technologies.” (SAXC, ¶79.) However, EdenIQ’s second cause of action is broader in that it also alleges, “Third Eye misrepresented the time frame during which it would fund the merger. On April 20, 2016, Third Eye represented to Edeniq that it contemplated a four to six week timeline for financing. Third Eye did not have reasonable grounds for believing this representation was true.” (SAXC, ¶80.) “If Edeniq had known that Third Eye would be unable to finance the merger in the four to six timeline it represented …, Edeniq never would have entered into the Merger Agreement.” (SAXC, ¶82.) Whether or not Third Eye made EPA approval a condition of financing does not address these other allegations in EdenIQ’s second cause of action.

C. Duty to disclose.

“ ‘[T]he elements of an action for fraud and deceit 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.’ [Citation.]” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

“The general rule for liability for nondisclosure is that even if material facts are known to one party and not the other, failure to disclose those facts is not actionable fraud unless there is some fiduciary or confidential relationship giving rise to a duty to disclose.” (La Jolla Village Homeowners’ Assn. v. Superior Court (1989) 212 Cal.App.3d 1131, 1151.) Here, Third Eye is not a party to the Merger Agreement. As such, Third Eye asserts it is not in any fiduciary relationship with EdenIQ. Nevertheless, Third Eye acknowledges a duty to disclose may still arise in the absence of a fiduciary relationship.

To maintain a cause of action for fraud through nondisclosure or concealment of facts, a plaintiff must demonstrate that the defendant was under a legal duty to disclose those facts. (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845.) “Where … there is no fiduciary relationship, the duty to disclose generally presupposes a relationship grounded in some sort of transaction between the parties. Thus, a duty to disclose may arise from the relationship between seller and buyer … or parties entering into any kind of contractual agreement.” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 337, internal citations omitted.) In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: “(1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; [or] (3) the defendant actively conceals discovery from the plaintiff.” (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294.)

In opposition, EdenIQ presents evidence which would at least create a triable issue of material fact with regard to whether a duty to disclose arose under the circumstances. EdenIQ proffers evidence that Bhalwani did not intend the four-to-six week period to commence until Third Eye had “conducted all of [its] due diligence,” “determined what the structure of the deal will be,” and agreed upon terms for the deal with Aemetis. Bhalwani did not actually tell Edeniq that the four-to-six week timeline would not commence until all of these events happened, but rather assumed that Brian Thome “ought to have known” that this is what he meant. Third Eye has never been able to close a merger within four to six weeks where it had not yet approved the financing. These facts present a triable issue with regard to whether Third Eye made a representation but did not disclose facts which materially qualify the representation or which render the representation likely to mislead.

On April 28, 2016, Third Eye informed Aemetis that it approved of the final Merger Agreement, but that due to Third Eye’s “total exposure to the Aemetis group,” it needed “to be in receipt of cash flows … within the next four weeks as part of its underwriting of the Edeniq financing.” Bhalwani never communicated to Edeniq that Third Eye needed to receive $5 million in cash flows or in any other amount from Aemetis before it would finance the merger. These facts present a triable issue with regard to whether there were facts known or accessible only to Third Eye, and Third Eye knows they are not known or reasonably discoverable by EdenIQ.

D. Reliance.

“Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff’s reliance is reasonable is a question of fact.” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) In Guido v. Koopman (1991) 1 Cal.App.4th 837, 843, the court stated that, “Justifiable reliance is an essential element of a claim for fraudulent misrepresentation, and the reasonableness of the reliance is ordinarily a question of fact. However, whether a party’s reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.”

Third Eye invites this court to find, as a matter of law, that EdenIQ’s reliance on Bhalwani’s statement that Third Eye could fund and close the merger in four to six weeks is unreasonable and unjustifiable. To support such a finding, Third Eye proffers evidence that during the call of April 20, 2016, Bhalwani informed EdenIQ that Third Eye had not approved the financing and that he needed time to look at the deal. As of the April 20, 2016, call, Third Eye had not yet reviewed financing for this merger. The Merger Agreement, signed by Edeniq, by its own terms allows Aemetis to extend the term of the merger to June 30, 2016. This would be an additional four weeks beyond the six week time-frame. Thome testified at deposition that he understood the four to six week time frame to be an estimate rather than a guarantee.

The court declines Third Eye’s invitation to decide this issue as a matter of law. Moreover, EdenIQ proffers evidence in opposition that on April 26, 2016, Third Eye rejected Edeniq’s statement that the Termination Date should be moved back to May 31, 2016, and stated: “No, need June 30 outside date to complete our internal requirements and legal and security documentation but will use commercial best efforts to close sooner.” Given the further reassurance by Third Eye, the court cannot state that EdenIQ’s reliance was unreasonable or unjustifiable as a matter of law.

Accordingly, cross-defendant Third Eye’s alternative motion for summary adjudication of the second cause of action in cross-complainant EdenIQ’s SAXC is DENIED. Cross-defendant Third Eye’s motion for summary judgment is DENIED.

IV. Cross-defendant Third Eye’s motion to seal.

A court has the authority to order that a record be filed under seal only if it expressly finds facts that establish:

1. there exists an overriding interest that overcomes the right of public access to the record;
2. the overriding interest supports sealing the record;
3. a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;
4. the proposed sealing is narrowly tailored; and
5. no less restrictive means exist to achieve the overriding interest.

(Cal. Rules of Court, Rule 2.550.)

The California Rules of Court do not define what constitutes an “overriding interest.” Instead, this has been left to case law. Different “[c]ourts have found that, under appropriate circumstances, various statutory privileges, trade secrets, and privacy interests, when properly asserted and not waived, may constitute overriding interests.” (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 298, fn.3 (quoting Judicial Council advisory committee comment to [former] Rule 243.1) (affirming lower court order unsealing certain records over defendants’ objection that the materials contained proprietary trade secrets); see also NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1222, fn.46 (overriding interests found in various cases include: protection of minor victims of sex crimes from further trauma and embarrassment, privacy interests of a prospective juror during individual voir dire, protection of witnesses from embarrassment or intimidation so extreme that it would traumatize them or render them unable to testify, protection of trade secrets, protection of information within the attorney-client privilege, and enforcement of binding contractual obligations not to disclose, safeguarding national security, ensuring the anonymity of juvenile offenders in juvenile court, ensuring the fair administration of justice, and preservation of confidential investigative information).)

A declaration supporting a motion to seal should be specific, not conclusory, as to the facts supporting the overriding interest. If the court finds that the supporting declarations are conclusory or otherwise unpersuasive, it may conclude that the moving party has failed to demonstrate an overriding interest that overcomes the right of public access. (In re Providian Credit Card Cases, supra, 96 Cal.App.4th at pp. 301, 305.)

Further, where some material within a document warrants sealing but other material does not, the document should be edited or redacted if possible, to accommodate the moving party’s overriding interest and the strong presumption in favor of public access. (Cal. Rules of Court, Rule 2.550, subd. (e)(1)(B); see In re Providian Credit Card Cases, supra, 96 Cal.App.4th at p. 309.) In such a case, the moving party should take a line-by-line approach to the information in the document, rather than framing the issue to the court on an all-or-nothing basis. (In re Providian Credit Card Cases, supra, 96 Cal.App.4th at p. 309.)

Third Eye’s motion to seal is unopposed. Third Eye requests sealing:

1. Declaration of Marwa Elzankaly in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye, and exhibits thereto.
2. Declaration of Michael Warren in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye, and exhibit thereto.
3. Declaration of Arif Bhalwani in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye, and exhibits thereto.
4. Memorandum of points and authorities in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye.
5. Separate statement of undisputed material facts in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye.

as they contain private financial information and internal business communications which are the subject of a confidentiality order, acknowledging that the parties maintain a right of privacy in those records. The request appears to be narrowly tailored.

Accordingly, Third Eye’s motion to seal Third Eye’s motion for summary judgment is GRANTED. The court finds: (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest.

The court clerk is directed to seal the following unredacted documents and no public access to the unredacted documents will be allowed without further order from this court:

1. Declaration of Marwa Elzankaly in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye, and exhibits thereto.
2. Declaration of Michael Warren in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye, and exhibit thereto.
3. Declaration of Arif Bhalwani in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye, and exhibits thereto.
4. Memorandum of points and authorities in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye.
5. Separate statement of undisputed material facts in support of Third Eye Capital Corporation’s motion for summary judgment, or alternatively, summary adjudication of defendant and cross-complainant, Edeniq, Inc.’s second amended cross-complaint against Third Eye.

Counsel for moving party must contact clerk to facilitate the sealing of said documents.