Case Number: BC540186 Hearing Date: February 09, 2015 Dept: 58
JUDGE ROLF M. TREU
DEPARTMENT 58
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Hearing Date: Monday, February 9, 2015
Calendar No: 4
Case Name: Opis Capital, Inc. v. Reve Investments, Inc., et al.
Case No.: BC540186
Motion: (1) Demurrer and Motion to Strike
(2) Motion for Judgment on the Pleadings
Moving Party: (1) Cross-Defendants Opis Capital, Inc.; Leslie H. Naidu aka Dave Naidu; and Michael Wedaa
(2) Defendants Reve Investments, Inc. dba Lexington Social House; Junella Chin; Jeremy Chin; and Alice Chin
Responding Party: (1) Cross-Complainants Reve Investments, Inc. dba Lexington Social House; Junella Chin; Jeremy Chin; and Alice Chin
(2) Plaintiff Opis Capital, Inc.
Notice: OK

Tentative Ruling: (1) Demurrer is overruled. Motion to strike is granted as to the allegations concerning attorney fees without leave to amend and is otherwise denied. Opis, Naidu, and Wedaa are to answer the FACC within 15 days.

(2) Motion for judgment on the pleadings is granted in part. 20 days leave to amend is granted except as to the 4th COA for unjust enrichment, to which the motion is granted without leave to amend.
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I. Background
On 3/21/14, plaintiff Opis Capital, Inc. filed this action against defendants Reve Investments, Inc. dba Lexington Social House; Junella Chin; Jeremy Chin; and Alice Chin (collectively “Reve Parties”); and defendant 1718 Vine St. LLC arising out of an alleged wrongful termination and failure to pay for management, business development, and marketing consulting services. Opis asserts causes of action for (1) breach of written contract, (2) fraud, (3) quantum meruit, (4) unjust enrichment, (5) money had and received, and (6) copyright infringement.

On 5/12/14, answers were filed by the Reve Parties and 1718 Vine St. LLC: the Reve Parties also filed a cross-complaint against Opis and cross-defendants Leslie H. Naidu aka Dave Naidu, David Naidu, Michael Wedaa, Norm Bour, Steve Rafalovich, and Jeff Kimura. On 8/19/14, the Reve Parties voluntarily dismissed David Naidu and Jeff Kimura from the cross-complaint without prejudice. After the Court ruled on a demurrer and motion to strike filed by Opis, Leslie H. Naidu, and Michael Wedaa (collectively “Opis Parties”), the Reve Parties filed a First Amended Cross-Complaint on 12/2/14 which asserts causes of action for (1) breach of fiduciary duty, (2) intentional misrepresentation, (3) negligent misrepresentation, (4) civil conspiracy, (5) breach of contract, (6) declaratory relief, and (7) unfair business practices. The 5th and 6th COAs are asserted by Reve against Opis only.

Trial is set for 8/3/15; FSC for 7/16/15.

II. Demurrer and Motion to Strike
Opis Parties have filed a demurrer and motion to strike as to the Reve Parties FACC. In connection with the demurrer and motion to strike, the Reve Parties request judicial notice of the Court’s ruling on the Opis Parties’ previous demurrer and motion to strike. The RJN is granted.

1. Naidu and Wedaa
Naidu and Wedaa separately demur to the 1st through 4th and 7th COAs on the ground that no contractual or other relationship has been alleged as to them with the Reve Parties such that they are individually liable. However, this argument fails to distinguish between joint liability with Opis and independent individual liability. “Directors are jointly liable with the corporation and may be joined as defendants if they personally directed or participated in the tortious conduct.” Frances T. v. Village Green Owners Ass’n (1986) 42 Cal.3d 490, 504. Naidu and Wedaa are alleged to have acted on behalf of Opis. FACC ¶ 8. The argument that there are no allegations of actions taken in their individual capacities addresses their independent liability for their own alleged tortious conduct (Frances T., 42 Cal.3d at 507-8): this does not establish that there are insufficient facts alleged to support their joint liability with Opis. Naidu and Wedaa’s separate demurrer is overruled.

2. Fraud-Based COAs
a. Particularity of Allegations
Opis Parties argue that the intentional and negligent misrepresentation COAs are not alleged with particularity. See Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 72-73; Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 (requiring pleading facts which “show how, when, where, to whom, and by what means the representations were tendered); Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519 (negligent misrepresentation). The Court previously sustained the demurrer on this ground concluding that the Reve Parties failed to distinguish among the cross-defendants or cross-complainants, and failed to indicate how, where, and by what means the representations were tendered.

However, the FACC now alleges that shortly after a “Guppy Tank” seminar event in October 2012, Naidu, Wedaa, and Bour met with the Reve Parties and verbally represented the cross-defendants’ special skill and experience in Reve’s business and industry (FACC ¶ 12): these representations of cross-defendants’ skill and experience as well as knowledge of Reve’s business and financial circumstances were repeatedly made by Naidu and Wedaa to Junella Chin and Jeremy Chin in meetings and telephone conversations in late 2012 and early 2013 (id. ¶ 17). At the pleading stage, these allegations are sufficient to allege facts with particularity. The demurrer is overruled on this ground.

b. Promises of Future Conduct
Opis Parties also argue that the negligent misrepresentation COA is based on non-actionable promises of future conduct. See B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823, 834; Tarmann v. State Farm Mutual Automobile Ins. Co. (1991) 2 Cal.App.4th 153, 159 (declining to recognize a negligent false promise). The Court previously sustained the demurrer on these grounds because the Reve Parties had only alleged representations that they would increase the revenue and profitability of Reve by developing a comprehensive management and marketing plan. Here, as indicated above, the Reve Parties’ fraud-based COAs are no longer solely based on such non-actionable promises of future conduct. Because a demurrer cannot be directed at part of a cause of action (see Kong v. City of Hawaiian Gardens (2002) 108 Cal.App.4th 1028, 1047), the demurrer is overruled on this ground.

3. Conspiracy
Opis Parties argue that Naidu and Wedaa owe no personal duty to the Reve Parties. See Berg & Berg Enter., LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 824-25. This is a variant of the separate demurrer by Naidu and Wedaa, which fails to distinguish between the joint and independent duty/liability. The demurrer is overruled as to the conspiracy COA.

4. Unfair Business Practices
Opis Parties argue that there are no allegations to support unlawful, unfair, or fraudulent business practices. See Bus. & Prof. Code §17200. The Court previously sustained the demurrer based on the failure to allege facts as to how the breach of fiduciary duty or breach of contract COAs are based on conduct that threatened or harmed competition such that it is unfair. See, e.g., Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1366.

However, the Reve Parties allege that the cross-defendants misrepresented their skill and experience and stated that they would develop a comprehensive plan for management and marketing (FACC ¶¶ 12-14); cross-defendants failed to develop such a plan (id. ¶ 16) but then switched their pitch to include a three-year service agreement along with an ownership interest (id. ¶¶ 17-18); cross-defendants then failed to perform their marketing and management services despite increased control and continued payments for such services through high-interest loans (id. ¶¶ 20-26). The fraud-based COAs and the additional allegations as to the alleged misrepresentations of cross-defendants’ skill, experience, and knowledge are sufficient to support unfair and fraudulent business practices. The demurrer is overruled as to the unfair business practices COA.

5. Motion to Strike
a. Punitive Damages
Opis Parties move to strike the claim for punitive damages other than in connection with the breach of fiduciary duty COA. As a result of the Court’s ruling on the fraud-based COAs, the claims for punitive damages are sufficiently supported as to all COAs. The motion to strike is denied as to the claim for punitive damages.

b. Attorney Fees
Opis Parties move to strike the allegations of the Reve Parties’ incurring attorney fees. See, e.g., FACC ¶ 37. The Court previously granted the motion to strike on the ground that there were no allegations of a basis for the recovery of attorney fees. See Wiley v. Rhodes (1990) 223 Cal.App.3d 1470, 1474; Agricultural Ins. Co. v. Superior Court (1999) 70 Cal.App.4th 385, 405. Although the FACC no longer seeks recovery of attorney fees, the FACC continues to allege that the Reve Parties have incurred attorney fees to be proved at trial. This is improper. The motion to strike is granted as to the allegations of the Reve Parties’ incurring attorney fees.

III. Motion for Judgment on the Pleadings
Reve Parties have filed a motion for judgment on the pleadings as to the Opis Complaint. In connection with the motion for judgment on the pleadings, the Reve Parties request judicial notice of the Court’s ruling on the Opis Parties’ previous demurrer and motion to strike. The RJN is granted.

1. Alter-Ego
The Reve Parties argue that the alter ego allegations (Complaint ¶ 9) are conclusionary. The Court agrees. Opis alleges only the conclusion that the Reve Parties and 1718 Vine St. LLC are each alter egos of each other. While Opis has restated the elements supporting alter ego liability (see, e.g., Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285; First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 914-15), no facts are alleged to support them or to distinguish among the Reve Parties and 1718 Vine St. LLC. The motion for judgment on the pleadings is granted on this ground.

2. Breach of Contract
The Chins separately argue that no facts are alleged as to their contractual liability. The court agrees. Consistent with the Court’s ruling as to the alter ego allegations, Opis alleges only that it entered into a 3-year consultation agreement that was signed by Jeremy Chin on behalf of Reve (Complaint ¶ 13; see also id. ¶ 21). No facts are alleged to support liability under that contract as to the Chins. The motion for judgment on the pleadings is granted on this ground.

3. Fraud
The Reve Parties argue that the fraud COA is insufficiently alleged. The Court agrees in part. Opis fails to allege facts with particularity as to representations by the Chins. See Complaint ¶¶ 30-31 (alleging that defendants made express representations in the 3-year consultation agreement in face-to-face meetings and in written correspondence). The motion for judgment on the pleadings is granted on this ground.

However, to the extent the Reve Parties argue that Opis’ fraud COA fails to allege more than a mere failure to perform a promise (see Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30), this fails to acknowledge the allegations that the representations were made to induce Opis’ continued provision of services that would benefit defendants’ business but avoid paying the amount due to Opis (Complaint ¶¶ 31-32). This is sufficient to allege facts supporting intent to mislead beyond a mere failure to perform. The motion for judgment on the pleadings is denied on this ground.

4. Common Counts
The Reve Parties argue that the common counts are deficient based on the deficient breach of contract claim. See Zumbrun v. Univ. of Southern Cal. (1972) 25 Cal.App.3d 1, 13. The Court agrees to the extent the common counts are asserted against the Chins, and the motion for judgment on the pleadings is granted on this ground.

However, to the extent the Reve Parties argue that the common counts claims are inconsistent with the breach of contract claim, Opis correctly notes that it may assert alternative legal theories. See, e.g., Mendoza v. Rast Produce Co., Inc. (2006) 140 Cal.App.4th 1395, 1402. Therefore, the motion for judgment on the pleadings is denied on this ground.

5. Unjust Enrichment
The Reve Parties argue that unjust enrichment is not a cause of action. See, e.g., Levine v. Blue Shield of Cal. (2010) 189 Cal.App.4th 1117, 1138; but see Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593. Opis does not oppose the motion on this ground. Therefore, the motion for judgment on the pleadings is granted as to the 4th COA for unjust enrichment without leave to amend.

6. Copyright Infringement
The Reve Parties argue that the Court lacks subject matter jurisdiction over the 6th COA for copyright infringement. 28 U.S.C. § 1338(a). Opis acknowledges the original and exclusive jurisdiction of the federal court over copyright claims, but requests leave to allege a common law tort claim (see, e.g., Civic Partners Stockton, LLC v. Youssefi (2013) 218 Cal.App.4th 1005, 1017 (concerning conversion of a particular object containing a copyrightable work); Mattel, Inc. v. Luce, Forward, Hamilton & Scripps (2002) 99 Cal.App.4th 1179, 1185-86 (concerning malicious prosecution in connection with a copyright infringement action)). The motion for judgment on the pleadings is granted on this ground.

7. Leave to Amend
Because this is the first challenge to the Complaint, the Court will grant Opis leave to amend except as to the 4th COA for unjust enrichment.