Case Number: KC065334 Hearing Date: June 06, 2014 Dept: J

Re: Zhaosheng Chen, et al. v. Bam Brokerage, Inc., etc., et al. (KC065334)

MOTION FOR JUDGMENT ON THE PLEADINGS

Moving Parties: Defendants Bam Brokerage, Inc. and On The Edge Marketing

Respondents: Plaintiffs Zhaosheng Chen and Yishun Chen

POS: Moving OK; Opposing OK; Reply OK

Plaintiffs seek rescission of patent assignments allegedly obtained by fraud. The Complaint herein, filed on 12/28/12, asserts causes of action for:

1. Intentional misrepresentation
2. Negligent misrepresentation
3. Rescission
4. Declaratory relief
5. Unjust enrichment
6. Conversion.

A Court Trial is set for 7/07/14.

Defendants BAM Brokerage, Inc. and On The Edge Marketing (“Defendants”) move for judgment on the pleadings pursuant to CCP §438 as to the Complaint filed by Plaintiffs Zhaosheng Chen and Yishun Chen, individuals (“Plaintiffs”), on the grounds of res judicata. Plaintiffs filed this Complaint on 12/28/12 alleging that Defendants fraudulently obtained assignment of patents belonging to Plaintiffs for a product called a “Folding Wagon.” Plaintiffs allege causes of action for: (1) Intentional misrepresentation, (2) Negligent misrepresentation, (3) Rescission, (4) Declaratory relief, (5) Unjust enrichment, and (6) Conversion.

A motion for judgment on the pleadings has the same function as a general demurrer but is made after the time for demurrer has expired. (Cloud v. Northrup Grumman Corp. (1998) 67 Cal.App.4th 995, 999). The grounds for a motion for judgment on the pleadings must appear on the face of the challenged pleading or be based on fact which the court may take judicial notice. (Saltarelli & Steponovich v. Douglas (1995) 40 Cal.App.4th 1).

DEFENDANTS’ REQUEST FOR JUDICIAL NOTICE:

The request to take judicial notice of the Complaint in KC063629, the Complaint in this action, and the motion to set aside the default judgment in this action is granted, although the court cannot take judicial notice of the CONTENT of any declarations submitted therewith.

PLAINTIFFS’ REQUEST FOR JUDICIAL NOTICE:

The requests to take judicial notice of the pleadings in KC063629, KC065334, and the bankruptcy proceedings are granted, although the court cannot take judicial notice of the CONTENT of an declarations. The request to take judicial notice of deposition excerpts is denied.

Defendants argue that this Complaint is the same as one filed by Everyday Sports, Inc. on April 19, 2012, case number KC063629, against Bam Brokerage, Inc. alleging breach of contract; open book account; account stated; common counts; unjust enrichment; and intentional and negligent misrepresentations. That action proceeded to judgment after default on 10/18/12 for a total award of $330,955.55.

“The doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy.” (7 Witkin, Cal. Procedure (5th Ed. 2008) Judgment, §334, p. 938.) The doctrine “has a double aspect.” Todhunter v. Smith (1934) 219 Cal. 690, 695. “In its primary aspect, commonly known as claim preclusion, it operates as a bar to the maintenance of a second suit between the same parties on the same cause of action.” Clark v. Lesher (1956) 46 Cal.2d 874, 880. In its secondary aspect, commonly known as collateral estoppel, “[t]he prior judgment…operates in a second suit…based on a different cause of action…as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.” (Ibid.)

“The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) a claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding.” Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 556.

Here, Defendants claim that both cases involve the exact same business relationship between the plaintiffs and defendants; regarding the same purchase of the same folding wagons; regarding the same time frame of the parties’ relationship; and thus the second suit is barred by claim preclusion, which is part of the doctrine of res judicata. However, these cases are different. The unjust enrichment cause of action in the prior case alleged that Defendants would be unjustly enriched if they received the benefit of the purchased merchandise without rendering payment to Plaintiff. On the other hand, the unjust enrichment cause of action in the present case alleges that defendants would be unjustly enriched if they were allowed to keep the two patents that were obtained by deceiving Plaintiff into signing the assignment forms.

Further, the intentional and negligent misrepresentation causes of action are different. In the first case, it was alleged that Defendants falsely promised to make payments on merchandise received from Plaintiff. In the present action, Defendants are alleged to have obtained the two patents by deceiving Plaintiffs into signing the assignment forms that they believed to be authorization forms that allowed defendants to prosecute third parties who were infringing on Plaintiffs’ patents. Thus, the claims are not the same.

In addition, collateral estoppel, or issue preclusion, is not applicable since in the present action the issues are not the same, and the complaint does not allege the same essential facts. Defendants rest their entire motion on background information about the two cases, and make no attempt to discuss the essential facts or claims of the two cases.

California courts employ the ‘primary rights’ theory to determine the scope of causes of action. Under this theory, the underlying right sought to be enforced determines the cause of action. In determining the primary right, ‘the significant factor is the harm suffered.’ Craig v. County of Los Angeles (1990) 221 Cal.App.3d 1294, 1301. Here, in the first lawsuit Plaintiff allegedly suffered harm in not being paid for its product. In the present lawsuit, Plaintiffs allege their patents were obtained by fraud. Thus, the harms suffered are different. Therefore, the motion is denied.