2017-00207186-CU-FR

Paul Counts vs. Trevor Smith

Nature of Proceeding: Hearing on Demurrer to Complaint (Kristi Smith)

Filed By: Smith, Kristi

** If any party requests oral argument, then at the time the request is made, the requesting party shall inform the court and opposing counsel / opposing party in propria persona of the specific cause(s) of action or issue(s) on which oral argument is sought. **

Defendant Kristi Smith’s (Kristi) demurrer to the third amended complaint (TAC) is OVERRULED.

Kristi’s request for judicial notice is GRANTED.

Plaintiffs’ request for judicial notice is GRANTED.

Overview

This case presents a business dispute among investors and would-be filmmakers. The plaintiffs are Paul Counts (Counts), Scott Bennett, Kristen Counts and Unbelievers Movie, LLC, a Washington limited liability company (UM LLC) (collectively “Plaintiffs”). The defendants are Kristi, Trevor Smith and Usherance Studios, LLC, a California limited liability company (collectively “Defendants”). According to Plaintiffs, Defendants took their money on the promise it would be used to complete a film from which Plaintiffs would receive a share of the profits. Plaintiffs also allegedly received promises their funds would be applied to other investments. Plaintiffs contend Defendants converted the funds for their own, private uses.

The TAC contains causes of action against Kristi for aiding & abetting fraud, aiding & abetting conversion, defamation, declaratory relief and accounting. Kristi now demurs to the second cause of against her for aiding & abetting fraud. She also demurs to the seventh cause of action for aiding & abetting conversion, the eleventh cause of action for declaratory relief and the twelfth cause of action for accounting to the extent UM LLC advances them. And she purports to demur to several causes of action that are not directed at her. Plaintiffs oppose.

Discussion

The First, Third, Fourth, Ninth and Tenth Causes of Action

The demurrers are OVERRULED.

The subject causes of action are directed only at defendants other than Kristi. As a result, there is no basis for Kristi to demur.

Counts’ and Bennett’s Second Cause of Action for Aiding & Abetting Fraud

The demurrer is OVERRULED.

The court overruled Kristi’s demurrer to this cause of action as it was alleged in the second amended complaint (SAC). Section 430.41 of the Code of Civil Procedure bars Kristi from demurring to this cause of action again now. Subdivisions (b) and (g) of that section read, respectively:

A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer.

If a demurrer is overruled as to a cause of action and that cause of action is not further amended, the demurring party preserves its
right to appeal after final judgment without filing a further demurrer. (Emphasi

By enacting these provisions, the Legislature intended to bar successive demurrers of the type the Kristi now seeks to mount:

Similarly, the bill would prohibit a demurring party from demurring again to the same cause of action, unless the cause of action itself is amended. Specifically, when demurring to a pleading amended after a demurrer has been ruled on, the bill would not allow a party to demur to causes of action or defenses that were not amended, and would not allow a party to raise any issue which could have been raised earlier. If a demurrer is overruled and the pleading is not amended, the demurring party preserves the right to appeal after trial. This is intended to prevent parties from bringing demurrers on the same issues in an attempt to delay the case. (Emphasis added.)

(See Assem. Com. on Judiciary, Analysis of Sen. Bill No. 383, (2015-2016 Reg. Sess.) as amended July 9, 2015, pp. 9-10; accord Assem. Com. on Judiciary, 3d (Sen.) reading analysis of Sen. Bill No. 383 (2015-2016 Reg. Sess.) as amended Aug. 17, 2015, p. 7; accord Assem. Com. on Judiciary, 3d (Sen.) reading analysis of Sen. Bill No. 383 (2015-2016 Reg. Sess.) as amended Sept. 2, 2015, p. 7.) Notably, on grounds a defendant should not be prohibited from demurring on a basis it simply missed the first time around, opponents of the subject provisions in CCP § 430.41 objected before the provisions were enacted. (See Sen. Rules Com., Off. of Sen. Fl. Analyses, Analysis of Sen. Bill No. 383 (2015-2016 Reg. Sess.) as amended Sept. 2, 2015, p. 10.) The Legislature nonetheless included the same provisions in the final bill submitted to the Governor.

Although Plaintiffs did amend allegations appearing in the TAC, the allegations directed at Kristi in connection with the second cause of action have not substantively changed and, therefore, do not compel consideration of her current demurrer.

UM LLC’s Causes of Action

The demurrers are OVERRULED.

In the TAC, Counts alleges that he is UM LLC’s managing member. Citing Exhibit 1 to her request for judicial notice, Kristi argues that she is one of UM LLC’s “governors.” Exhibit 1 appears to be an online print-out from a Washington public entity and designates Kristi as governor. Kristi argues that, given her status as governor, and pursuant to the Revised Code of Washington § 23.95.105(12), UM LLC may not sue her. Section 23.95.105 provides several definitions. Subd. (12) of that section defines the term “governor” to mean “[a] manager of a manager-managed limited liability company” or “[a] member of a member-managed limited liability company,” among other definitions of the term. Kristi argues these definitions compel a conclusion that she is on par with Counts in terms of her authority over UM LLC. In her view, her status as governor bars Counts and the other plaintiffs from causing UM LLC from bringing legal claims against her.

For their part, Plaintiffs counter that Kristi admitted in her prior pleadings that Counts is a manager of UM LLC.

At this point, Counts’ authority to direct UM LLC’s legal claims against Kristi involves

factual issues related to the governance of UM LLC. There is no charter or operating agreement before the court, and the court may not resolve factual issues at this juncture.

Furthermore, whether UM LLC is a proper plaintiff depends on the applicable law, which Kristi has not analyzed in her moving papers. Kristi engages in some legal analysis for the first time in the reply, but the court disregards this untimely analysis, since Plaintiffs have not had a fair opportunity to respond. Moreover, Kristi’s legal analysis is not a mere rebuttal to issues raised for the first time in Plaintiffs’ opposition. As moving party, Kristi was required to make her legal arguments at the outset so that Plaintiffs could respond. The court thus rejects her demurrer to UM LLC’s causes of action.

Disposition

The demurrer is overruled.

Kristi is directed to file and serve her answer no later than 1/17/18.