Case Number: VC066629 Hearing Date: December 11, 2018 Dept: SEC

GUSTAFSON v. GUSTAFSON

CASE NO.: VC066629

HEARING: 12/11/18

JUDGE: LORI ANN FOURNIER

#9

TENTATIVE ORDER

Defendants RONALD R. GUSTAFSON; ERIC R. GUSTAFSON; and COAST PACKING COMPANY’s demurrer to Plaintiff CRAIG R. GUSTAFSON’s Third Amended Complaint is OVERRULED. CCP §430.10(e).

Defendants RONALD R. GUSTAFSON; ERIC R. GUSTAFSON; and COAST PACKING COMPANY’s motion to strike portions of Plaintiff CRAIG R. GUSTAFSON’s Third Amended Complaint is GRANTED with 5 days leave to amend.

Moving Party to give Notice.

This breach of fiduciary action was filed by Plaintiff CRAIG R. GUSTAFSON (“Plaintiff”) on October 10, 2017. Plaintiff and Defendant RONALD R. GUSTAFSON (“R. Gustafson”) are brothers. Defendant ERIC R. GUSTAFSON (“E. Gustafson”) is R. Gustafson’s son. Plaintiff’s Third Amended Complaint (“TAC”) filed on August 29, 2018 asserts the following causes of action: (1) Breach of Fiduciary Duty; (2) Fraud; (3) Unfair Competition; (4) Conversion; (5) Accounting; and (6) Declaratory Relief.

Defendants demur to Plaintiff’s third cause of action pursuant to CCP §430.10(e).

Third Cause of Action – Unfair Competition

Under Business & Professions Code §17200, “unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising.” To state a claim under §17200, Plaintiff must allege whether the conduct complained of is a fraudulent, unlawful or an unfair business practice. To bring a claim under the fraud prong, Plaintiffs must allege an affirmative misrepresentation, conduct or business practice on the part of a defendant; or an omission in violation of defendant’s duty to disclose; and that is likely to deceive members of the public. (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) To state a claim under the unfairness prong, Plaintiff must allege that one or more of Defendants’ business practices are unfair, unlawful or fraudulent; and the remedy sought is authorized by law. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676; see also Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) To state a claim under the unlawful prong, Plaintiffs must allege a violation of law and cite that law. (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610 [demurrer to SAC which failed to allege violation of a law was properly sustained without leave to amend].) To establish standing under Business and Professions Code §17200, Plaintiff must make a twofold showing demonstrating injury in fact and a loss of money or property caused by unfair competition. (B&P Code §17204.)

The demurrer to the third cause of action is overruled. Here, Plaintiff has alleged facts sufficient to show a scheme of distributing corporate profits to the individual defendants by way of unfair distributions, instead of distributing dividends to Plaintiff—a minority shareholder. The conduct, as alleged, constitutes a breach of fiduciary duty, and qualifies as an “unfair” or “unlawful” business practice under Bus. & Prof. Code §17203. The UCL permits violations of other laws to be treated as unfair competition that is independently actionable. (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.) The arguments raised by Defendants in the instant demurrer raise factual determinations inappropriately decided at this stage in the litigation.

Motion to Strike

The law is well-settled. “Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order. The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.” [Internal Citations Omitted.] (Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023.)

Defendants’ motion to strike Plaintiff’s cause of action for fraud is granted. In the interests of justice, and for the sake of judicial expediency, the Court grants Plaintiff five days leave to amend to add a cause of action for fraud. Defendants maintain their right to demur, strike, or answer after the amended pleading is filed.