17-CIV-01927 JOEL DROTTS VS. RONALD E. SNOW, ET AL.

JOEL DROTTS RONALD E. SNOW
PRO/per STEPHEN P. ELLINGSON

DEFENDANTS RONALD E. SNOW, INDEPENDENT ELECTRIC SUPPLY, INC., AND AMERICAN QUALIFIED PLANS’ DEMURRER TO PLAINTIFF JOEL DROTTS’ FOURTH AMENDED COMPLAINT TENTATIVE RULING:

As to all twelve asserted claims in Plaintiff Joel Drotts’ 1-31-18 Fourth Amended Complaint (FAC), Defendants Ronald E. Snow’s, Independent Electric Supply, Inc.’s, and American Qualified Plans’ Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND. However, as further explained below, Plaintiff is GRANTED LEAVE to assert, if he can, a valid cause of action that is not based on the alleged events that took place in 1999/2000.

On a procedural note, the Court previously continued the hearing on this Demurrer multiple times due to Plaintiff’s non-compliant Opposition briefs, which vastly exceeded the 15-page limit (CRC 3.1113(d)), each time requesting that Plaintiff file an Opposition that does not exceed 15 pages. Once again (for the third time), Plaintiff has filed an Opposition exceeding the page limit. (See 11-16-18 Opposition). The Court has nonetheless reviewed and considered Plaintiff’s arguments. Going forward, the Court will expect strict compliance with the Court’s rules and the California Rules of Court.

While very difficult to parse through, the twelve asserted causes of action in Plaintiff’s 82-page FAC appear to be based primarily, but perhaps not entirely, on events that occurred in 19992000. Specifically, Plaintiff alleges that Defendants, in 1999, as part of a fraudulent conspiracy, commissioned Defendant American Qualified Plans to draft an intentionally false Valuation Report for Independent Electric Supply, Inc. (IES), and then used the Report to entice Plaintiff’s grandmother, in 2000, to sell the Hurd Family Trust’s (HFT) interest in IES for a reduced value. FAC, ¶21. Plaintiff contends the HRT, of which Plaintiff is an alleged beneficiary, suffered “lost profit” damages of about $4.2 million. FAC, ¶¶12, 87.

All twelve causes of action are time-barred, because they are all based on the 1999 Valuation Report and the year 2000 sale of HFT’s interest in IES.

Plaintiff’s claims based on the 1999 Valuation Report and HFT’s year 2000 sale of its interest in IES are time-barred. As stated previously (see 5-21-18 Order), ¶¶47-52 of the FAC admit that Plaintiff had sufficient notice (at a minimum, sufficient inquiry notice) of these claims no later than 2011. He did not file suit until 2017, roughly five years later. None of the asserted claims has a statute of limitations exceeding three years. Plaintiff alleges that in 2011 (11 years after the sale), after reviewing previously-unavailable documents, he formed a belief that IES had been “grossly undervalued” in the 1999 Valuation Report, which prompted Plaintiff to begin an investigation into the matter. Id. Plaintiff approached IES’ attorney, who allegedly warned and threatened him not to investigate the matter further. ¶¶50-52. Plaintiff then conducted his own research into IES’ approximate value in 2000, including reviewing “every article he could find” shedding light on the 1999/2000 share value. Id. As alleged, at the time, it appeared to Plaintiff that Defendants had taken steps to insure only they would be privy to the “critical information” regarding IES’ value. Id. The FAC further alleges that in 2011, Plaintiff placed Defendants on notice of possible litigation regarding these matters. FAC, ¶47 (alleging that as part of his 2011 investigation, Plaintiff questioned IES’ counsel and “co-conspirator,” and put defendants “on notice of possible litigation on the causes of action at issue.”). A cause of action accrues when Plaintiff suspects or should suspect that his/her injury was caused by wrongdoing. It is not necessary that Plaintiff possess all the facts, nor possess proof of any wrongdoing. Once a plaintiff suspects wrongdoing, he/she “must go find the facts; she cannot wait for the facts to find her.” Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110-11; Fox v. Ethicon Endo Surgery, Inc. (2005) 35 Cal.App.4th 797, 807-08. Given Plaintiff’s allegations, his claims based on the 1999 Valuation Report and the year 2000 purchase/sale of the HFT’s interest in IES are time-barred, and granting leave to amend would be futile. Accordingly, the Demurrer to all twelve causes of action is SUSTAINED WITHOUT LEAVE TO AMEND (see, however, language below regarding leave to assert a new cause of action).

Plaintiff’s allegations of an on-going conspiracy, “continuous accrual,” and/or delayed discovery of his claim(s) lacks merit and do not change the result. Plaintiff argues and alleges that information he acquired several years after 2011 confirmed his previous suspicion of wrongdoing. Even if true, such allegations do not restart the statute of limitations that began to run no later than 2011, and had expired. Miller v. Bechtel Corp. (1983) 33 Cal.3d 868. Plaintiff has not alleged any post-2011 act(s) that can reasonably be characterized as an overt act “in furtherance of” the alleged conspiracy that began in 1999/2000. Plaintiff argues Defendants did not sell the shares they acquired from HFT until 2015. Plaintiff also points to a 2017 email he received from Defendants’ counsel advising Plaintiff to drop this lawsuit. FAC, ¶¶66-68. He further alleges that Defendant Snow, as a trustee of one or more of the family trusts, has recently violated statutes requiring him to provide an annual accounting. None of these allegations, however, can reasonably be characterized as an overt act in furtherance of a conspiracy that commenced in 1999, and which Plaintiff suspected no later than 2011, which somehow re-started the expired statute of limitations.

Notwithstanding the foregoing, the Court GRANTS Plaintiff leave to assert, if he can, a valid cause of action unrelated to the 1999/2000 IES valuation/sale.

While the vast majority of the FAC appears based on Defendants’ alleged under-valuation of IES in 1999-2000, Plaintiff also appears to allege wrongdoing based on recent acts. He alleges, as noted above, that Defendant Snow is currently a trustee of the Richard Hurd Descendant’s Trust (RHDT), and in recent years has violated statutes requiring that he provide an annual accounting for the trust. See, e.g., FAC, ¶12; Probate Code 16060, 16062. Although such allegations cannot be considered overt acts in continuance of a 19-year-old conspiracy, and do not revive the timebarred claims relating to events that occurred in 1999/2000, these allegations of recent Probate Code violations may be actionable. Defendants contend Plaintiff cannot assert any of this claims without representation by counsel. (See 4-2-18 moving papers at 6-7; 11-26-18 Reply brief at 89). The Court agrees that Plaintiff, as a non-member of the State Bar, cannot represent a corporation, and cannot file suit as a trustee. Bus. & Prof. Code § 6125; Ziegler v. Nickel, 64 Cal.App.4th 545, 549 (1998). Defendants have not, however, identified authority barring Plaintiff from alleging violations of the Probate Code as a trust beneficiary. Thus, to the extent Plaintiff seeks to assert a cause of action that is not based on the 1999/2000 IES valuation/sale, such as an alleged recent violation of the Probate Code, the Court grants Plaintiff leave to do so.

Any further amended Complaint shall be filed with 21 days of Notice of Entry of this Order.

If the tentative ruling is uncontested, it shall become the order of the Court, pursuant to CRC Rule 3.1308(a)(1), adopted by Local Rule 3.10. If the tentative ruling is uncontested, DEMURRING PARTY is directed to prepare, circulate, and submit a written order reflecting this Court’s ruling verbatim for the Court’s signature, consistent with the requirements of CRC Rule 3.1312. The proposed order is to be submitted directly to Judge Susan L. Greenberg, Department 3.