Superior Court, State of California
DATE: JUNE 29, 2023 TIME: 1:30 P.M.
PREVAILING PARTY SHALL PREPARE THE ORDER
UNLESS OTHERWISE STATED (SEE RULE OF COURT 3.1312)
|LINE # |CASE # |CASE TITLE |RULING |
|LINE 1 |19CV347622 |InESS Solutions, Inc. v. Cisco Systems, Inc. (Lead Case; |RESCHEDULED to 7/20/23. |
| | |Consolidated with Case No. 19CV350478) | |
|LINE 2 |21CV389927 |Johnson v. FS Palo Alto Employment, Inc. (PAGA) |RESCHEDULED to 8/10/23. |
|LINE 3 |22CV398775 |Ostapenko v. Google LLC (Class Action) |See tentative ruling. The Court |
| | | |will prepare the final order. |
|LINE 4 |21CV382973 |Velasquez v. Chargepoint, Inc. (Class Action) |See tentative ruling. The Court |
| | | |will prepare the final order. |
|LINE 5 |20CV361950 |Blackberry Corporation, et al. v. Sentinel Labs, Inc., et al.|OFF CALENDAR. |
|LINE 6 |22CV399095 |Fritch, et al. v. Universal Protection L.P., et al. |See tentative ruling. The Court |
| | | |will prepare the final order. |
|LINE 7 |22CV399096 |Megia, et al. v. Universal Protection Service, LP, et al. |See line 6. |
|LINE 8 |22CV398848 |Lane, et al. v. Universal Protection Service, LP, et al. |See line 6. |
|LINE 9 |22CV399418 |Davallou, et al. v. Universal Protection L.P., et al. |See line 6. |
|LINE 10 |23CV413374 |Balleza, et al. v. Universal Protection Service L.P., et al. |See line 6. |
|LINE 11 |17CV306546 |Rogers v. iTy Labs Corp., et al |See tentative ruling. The Court |
| | | |will prepare the final order. |
|LINE 12 |22CV400206 |Gil v. Universal Protection L.P., et al. |This is a hearing to show cause, |
| | | |so no tentative ruling is |
| | | |necessary. |
|LINE 13 |22CV400239 |Bertolet, et al. v. Universal Protection L.P., et al. |This is a hearing to show cause, |
| | | |so no tentative ruling is |
| | | |necessary. |
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Case Name: Ostapenko v. Google LLC
Case No.: 22CV398775
Plaintiff Michael Ostapenko brings this putative class action for breach of contract, alleging that Defendant Google LLC improperly assigns negative performance ratings and underpays bonuses based on employees’ performance in responsibilities outside the scope of their job duties.
Google now demurs to the single breach of contract cause of action in the operative Second Amended Class Action Complaint (“SAC.”)[1], or in the alternative, motion to strike the class claims. Plaintiff opposes the motion in both respects. As discussed below, the Court SUSTAINS the demurrer WITHOUT leave to amend, and DEEMS AS MOOT the motion to strike.
BACKGROUND
According to Plaintiff, Google has approximately 80,000 employees in California. (SAC, p. 12:31.) Plaintiff estimates Google breached the contracts of at least 31% or 25,000 of its employees during each year from 2018 through 2022. (Id. at p. 12:28-29.) Google rated the performance of roughly 2% of its employees as “Needs Improvement” for six quarters during the years 2018 through 2021. (Id. at p. 13:1-4.)
Google employed Plaintiff as a software engineer from June 4, 2018 to March 31, 2023. (SAC, pp. 15:3-4; 44:22-23.) Plaintiff alleges that Google had a duty to pay him annual bonuses based solely on his job duties (e.g. designing, implementing, testing, maintaining, evaluating, and monitoring of software), with a cap of at least 15% of his actual salary. (Id. at p. 15:6-11.) Plaintiff further alleges that Google evaluated his performance based on behavior (e.g. being humble, respectful, agreeable, etc.), and but for the behavioral component he would have received a higher performance rating. (Id. at p. 15:12-15.) Plaintiff did not know of Google’s policies requiring performance ratings to consider behavior until after he signed the employment contract. (Id. at p. 45:16-18.)
DEMURRER
Google demurs to the Second Amended Class Action Complaint for failure to state a cause of action. (Code Civ. Proc. § 430.10, subd. (e).)
1 Legal Standard
As the Court’s order on the prior demurrer noted, the legal standard is as follows:
A demurrer tests the legal sufficiency of the complaint. (Chen v. PayPal, Inc. (2021) 61 Cal.App.5th 559, 568.) Consequently, it “reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice.” (Weil v. Barthel (1955) 45 Cal.2d 835, 837; see also Code Civ. Proc., § 430.30, subd. (a).) “It is not the ordinary function of a demurrer to test the truth of the plaintiff’s allegations or the accuracy with which he describes the defendant’s conduct. … Thus, … the facts alleged in the pleading are deemed to be true, however improbable they may be.” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958, internal citations and quotations omitted.)
In ruling on a demurrer, the allegations of the complaint must be liberally construed, with a view to substantial justice between the parties. (Glennen v. Allergan, Inc. (2016) 247 Cal.App.4th 1, 6.) Nevertheless, while “[a] demurrer admits all facts properly pleaded, [it does] not [admit] contentions, deductions or conclusions of law or fact.” (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1120 (George).)
2 Discussion
Plaintiff’s claim is based on language in his 2018 and 2021 offer letters stating:
You are eligible to participate in the company discretionary bonus plan; your annual bonus target will be 15.0% of your base salary. The actual bonus amount could be larger or smaller than this amount, based on your performance, and the performance of the company. The exact bonus amount is at the sole discretion of Google. The components of your bonus are subject to periodic review.
(SAC, Exhibits A1, A9.)
As noted in the Court’s prior order:
“[E]ligibility for bonus payments is properly determined by the bonus plans’ specific terms and general contract principles.” (Neisendorf v. Levi Strauss & Co. (2006) 143 Cal.App.4th 509, 523.) “On a demurrer, the court must consider the sufficiency of the allegations … to determine whether [a] contract is reasonably susceptible to the plaintiff’s alleged interpretation.” (George, supra, 201 Cal.App.4th at p. 1128.)
1 The Discretionary Bonus Provision is not a Binding Contract
Google persuasively contends that discretionary bonuses by definition cannot form the basis for a breach of contract claim because they lack a definite commitment and obligation to pay. (See Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 213–214 [“promises to pay salary increases or bonuses which are ‘appropriate’ to Rochlis’s responsibilities and performance … are not capable of enforcement in a court of law”], disapproved on another ground by Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1251.)
Plaintiff correctly contends that Neisendorf v. Levi Strauss & Co. (2006) 143 Cal.App.4th 509, 523 (“Neisendorf”) does not refute the existence of a legally enforceable bonus payment contract. The Neisendorf court explicitly held that
California courts have consistently characterized bonus and profit sharing plans as constituting an offer of the stated benefits in exchange for the service of an employee, and upon the employee's completion of the required services in accordance with the terms of the plan, a binding contract is formed under which the employer is obligated to deliver the promised benefits.
(Ibid. [emphasis in original].)
However, Neisendorf is distinguishable from the instant case because of the specificity conditioned in the bonus plan – the Neisendorf employee was required to complete specified services and reach a measurable benchmark. (Ibid.) Here, Google explicitly reserves the right to determine an appropriate bonus amount based on employee and company performance – vague terms that are in contrast with the policy in Neisendorf, but congruent with the policy alleged in Rochlis.
Accordingly, the bonus provision is not sufficiently definite to articulate a contract as a matter of law.
2 Plaintiff Fails to State a Claim for Breach of Contract
Even if Plaintiff could argue that the discretionary bonus provision was an enforceable contract, Plaintiff still does not state a claim for breach of the contract because his interpretation of the allegedly breached provision is unsupported.
Plaintiff contends that the bonus provisions of his 2018 and 2021 offer letters require Google to determine and pay bonuses based solely on the invited performance (e.g. designing, implementing, testing, maintaining, evaluating, and monitoring of software), and in failing to do so, Google breached Plaintiff’s employment agreement. However, this interpretation relies on unspecified “express language of the contract and the relevant extrinsic evidence” and therefore constitutes an unsupported factual conclusion insufficient to survive on demurrer. (See George, supra, 201 Cal.App.4th at p. 1127 [holding that “a mere allegation of unidentified extrinsic evidence” is insufficient to overrule a demurrer].)
Although Plaintiff cites at great length a multitude of legal authority on contract interpretation and principles, Plaintiff still does not point to any contractual language that suggests Google’s discretion to distribute bonuses is limited to the invited performance. In fact, the language expressly states that bonus amount is within Google’s sole discretion, dependent on employee and company performance, with “components” of the bonus subject to periodic review. (SAC, Exhibit A9.) Moreover, Plaintiff’s repetition of his subjective beliefs that performance evaluations were strictly based on the invited performance is insufficient to interpret the bonus provision in such a manner in light of the explicit terms that Plaintiff acknowledged and agreed to upon signing the offer letter. (See Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 956 [“The parties’ undisclosed intent or understanding is irrelevant to contract interpretation.”])
Accordingly, Plaintiff fails to allege a claim for breach of contract.
3 Breach of the Implied Covenant of Good Faith and Fair Dealing Raised for the First Time
To the extent Plaintiff intends to raise an additional cause of action for breach of the covenant of good faith and fair dealing in his Opposition, a responding paper is not the proper procedural vehicle to do so. Moreover, when a demurrer is sustained with leave to amend, the leave must be construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.) Absent prior leave of court an amended complaint raising entirely new and different causes of action may be subject to a motion to strike. (See Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [“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.”])
It does not appear to the Court that Plaintiff can successfully amend this claim given the circumstances present here, thus, it will not grant leave to amend. (See Camsi IV v. Hunter Technology Corp. (1991) 230 Cal.App.3d 1525, 1542 [“absent an effective request for leave to amend in specified ways,” it is an abuse of discretion to deny leave to amend “only if a potentially effective amendment were both apparent and consistent with the plaintiff’s theory of the case”]; Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (Goodman) [“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading”].)
Accordingly, Google’s demurrer to the SAC is SUSTAINED without leave to amend. (Code Civ. Proc. § 430.10, subd. (e).)
Motion to Strike
In light of the Court’s ruling on the demurrer, Google’s motion to strike is MOOT.
III. Conclusion
The demurrer to the SAC is SUSTAINED without leave to amend (Code Civ. Proc. § 430.10, subd. (e).)) The motion to strike the SAC is denied as MOOT.
LAW AND MOTION HEARING PROCEDURES
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Case Name: Velasquez v. ChargePoint, Inc.
Case No.: 21CV382973
This is a putative class action on behalf of employees of Defendant ChargePoint, Inc., alleging failure to pay overtime, failure to compensate employees for missed meal and rest periods, and other wage and hour violations.
Before the Court are (1) Defendant’s motion to enforce and approve an alleged settlement agreement; and (2) Plaintiff’s motion to enforce the Court’s discovery order. Both motions are opposed. Plaintiff seeks monetary sanctions in connection with her motion, and Defendant seeks monetary sanctions in connection with its opposition to Plaintiff’s motion.
As discussed below, the Court DENIES Defendant’s motion and GRANTS Plaintiff’s motion in part and DENIES it in part. As to monetary sanctions, the Court GRANTS Plaintiff’s request in part and DENIES Defendant’s request.
I. BACKGROUND
Plaintiff Daniella Velasquez filed this action on June 14, 2021. Following a discovery dispute and the ensuing hearing on Plaintiff’s motion to compel, the Court issued its final order granting Plaintiff’s motion to compel on April 3, 2022 (hereafter, “Discovery Order”).[2]
The Court denied Plaintiff’s request for monetary sanctions in connection with her motion to compel. (See Discovery Order, p. 5:25.) It clarified that it gave the Defendant the benefit of the doubt regarding some arguably ambiguous statements it made at the informal discovery conference held on January 7, 2022, adding “[t]he Court is unlikely to give the same benefit of the doubt to Defendant for sanctions relating to future discovery disputes.” (Id. at p. 5:18-24.) The Discovery Order, issued on April 3, 2022 and filed the following day, called for Defendant to serve verified, code-compliant further responses within 30 days calendar days as to certain requests, and within 20 days of the completion of the Belaire-West [3] process as to the remaining requests. (Id. at p. 5:27-6:2.)
On March 27, 2023, Defendant’s counsel e-mailed a letter to Plaintiff’s counsel containing the general terms of a settlement offer. (See Declaration of Wendy Lazerson filed June 1, 2023, ¶ 8 (Lazerzon Decl.).) On April 3, 2023, the offer’s expiration date, Plaintiff’s counsel e-mailed Defendant’s counsel to request a one-week extension. (Id. at ¶¶ 8-9.) Later that day, Plaintiff’s counsel again emailed Defendant’s counsel, writing “Please disregard,” and “Plaintiff accepts.” (Id. at ¶ 9.)
On April 14, 2023, Defendant’s counsel e-mailed a long-form draft settlement agreement to Plaintiff’s counsel. (See Declaration of Shunt Tatavos-Gharajeh filed on June 9, 2023, ¶ 5 (Tatavos Decl.).) The draft settlement agreement contains the following language:
6. In consideration of and in return for the promises and covenants undertaken and the releases given:
a. Plaintiff will dismiss with prejudice all of her claims, including her individual claims and the putative class claims, in the Velasquez Litigation;
b. Plaintiff will dismiss the Velasquez Litigation in its entirety, with prejudice.
(Id. at ¶ 6, Ex. C.)
Thereafter, counsel for the parties communicated regarding disagreements related to the proposed settlement (including on April 19, 21, 27, and 28). (See Lazerson Decl., ¶¶ 10-14.) The parties were unable to agree upon terms related to the class claims. (Ibid.) Defendant’s counsel expressed her intention to move to enforce a settlement, and Plaintiff’s expressed his intention to move to enforce the Court’s prior order regarding discovery. (Id. at ¶¶ 14-15.)
II. DEFENDANT’S MOTION
ChargePoint moves for an order to enforce and approve a settlement agreement under Code of Civil Procedure section 664.6. Velasquez opposes, asserting there was neither an agreement nor a signed writing.
A. Legal Standard
If parties to pending litigation stipulate in a writing signed by the parties outside of the presence of the court for settlement of the case, the court, upon motion, may enter judgment pursuant to the terms of the settlement, and if requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement. (Code Civ. Proc., § 664.6, subd. (a).) The trial court may enter judgment pursuant to a stipulated agreement to settle in one of two ways: (1) in a writing signed by the parties; or (2) by oral agreement made “before the court.” (Ibid., Murphy v. Padilla (1996) 42 Cal.App.4th 707, 711-712.) A party moving for entry of judgment under section 664.6 need not establish a breach of the settlement agreement; rather, the court is authorized to enter judgment pursuant to the settlement regardless of whether the settlement’s obligations were performed, breached, or excused. (Hines v. Lukes (2008) 167 Cal.App.4th 1174, 1184-1185.)
Strict compliance with the statutory requirements is necessary before a court can enforce a settlement agreement under this statute. (Sully-Miller Contracting Co. v. Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37 (Sully-Miller).) Before an amendment was effective on January 1, 2021, “parties” under section 664.6 meant the litigants themselves, not their attorneys. (See Levy v. Superior Court (1995) 10 Cal.4th 578, 586.) The settlement had to include the signatures of the parties seeking to enforce the agreement and against whom enforcement is sought. (J.B.B. Investment Partners, Ltd. v. Fair (2014) 232 Cal.App.4th 974, 985 (J.B.B. I).)
The existence of a contract “requires parties capable of contracting, their consent, a lawful object, and a sufficient cause of consideration.” (J.B.B. Investment Partners, Ltd. v. Fair (2019) 37 Cal.App.5th 1, 9 (J.B.B. II).) Consent requires an offer and acceptance. (DeLeon v. Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 813.) Section 664.6 procedure empowers the judge hearing the motion to determine disputed factual issues that may have arisen regarding the settlement agreement, permitting the court “to entertain challenges to the actual terms of the stipulation,” that is, whether there “actually was” a settlement. (Fiore v. Alvord (1985) 182 Cal.App.3d 561, 566 [statute’s express authorization for trial courts to determine if settlement occurred is “implicit authorization” for trial court to determine settlement’s terms and conditions].)
In ruling on the motion, the trial court may receive oral testimony or may determine the motion upon declarations alone. (Corkland v. Boscoe (1984) 156 Cal.App.3d 989, 994.) Where the settlement is ambiguous, the court is required to consider extrinsic evidence of the parties’ intent. (Steller v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175, 183.) If the settlement leaves material terms wanting, or confusing, the settlement cannot be enforced through the section 664.6 summary proceeding and must be addressed in a separate civil action. (See Terry v. Conlan (2005) 131 Cal.App.4th 1445, 1460 [“a judge does not have authority to create material terms of the settlement”].) “The burden of proving all the material allegations of the agreement rests on the moving party.” (Gregory v. Hamilton (1978) 77 Cal.App.3d 213, 220; see also Pasqualetti v. Galbraith (1962) 200 Cal.App.2d 378, 383 [it is “fundamental that a court cannot make a contract for the parties, nor should it attempt to do so”].)
B. Discussion
Defendant argues, in relevant part, that “Plaintiff, through her counsel, accepted ChargePoint’s offer which expressly included an agreement to dismiss her individual claims with prejudice and the Court should enforce it.” (See Defendant’s memorandum of points and authorities, p. 6:8-10 (Def.’s memo).) Defendant relies upon J.B.B. II, in which the court found that failure to sign a more formal agreement did not “nullify the binding nature” of an agreement reached previously via e-mail. (Id. at p. 6:22-27; see also J.B.B. II, supra, 37 Cal.App.5th at p. 12.) Defendant further contends that the settlement is valid because it does not prejudice any absent putative class members. (Def.’s memo, p. 7:14-9:11.)
In opposition, Plaintiff contends that Defendant’s motion fails because there is “no signed settlement agreement whatsoever, let alone an agreement signed by Plaintiff herself.” (See Pl.’s opposition, p. 8:17-18.) Plaintiff refers to the Court to Levy v. Superior Court (1995) 10 Cal.4th 578 (Levy), in which the California Supreme Court concluded that settlement under Code of Civil Procedure section 664.6 requires the signature of the litigant, not merely their attorney. (Levy, supra, 10 Cal.4th at p. 580.) Plaintiff also relies upon language from J.B.B. I stating that “a typed named at the end of an email is not, by itself, a signature under case law.” (J.B.B. I, supra, 232 Cal.App.4th at p. 991.) Plaintiff further asserts that there was no agreement as to the material terms because she only expressed agreement to settling her individual claim with prejudice, not all claims of the putative class. (See Pl.’s opposition, p. 10-13.)
On reply, Defendant points out that the holding of Levy was superseded by legislative amendment effective in 2021, and that section 664.6 as revised no longer requires the signature of the litigant in all circumstances. (See Def.’s reply, pp. 1:15-18, 5:4-6-27.) Defendant argues that the parties had the same understanding of the material terms, asserting that there is no ambiguity as to Plaintiff’s individual versus class claims because a representative plaintiff has only a single claim for relief – their own. (Id. at p. 2:24-4:8 [citing Citizens of Humanity, LLC v. Ramirez (2021) 63 Cal.App.5th 117, 131.) Finally, Defendant argues that Plaintiff has conceded that the putative class would not be prejudiced by enforcing her individual settlement. (Def.’s reply, pp. 4:9-5:3.)
Here, the Court finds that Defendant’s motion must be denied even if the e-mail of Plaintiff’s counsel on April 2, 2023 could be construed as Plaintiff’s acceptance of an offer. Defendant is correct in pointing that out section 664.6, as amended, no longer requires the signature of the party as held in Levy. But even as amended, section 664.6 still requires a signed writing when the proffered settlement is based on a stipulation reached outside of the presence of the court. Here, neither Plaintiff’s nor her attorney’s physical signature (nor an electronic facsimile thereof), which would convey the certainty of a formal agreement, is present on the emails in question.
The Court cannot necessary rely on the names at the conclusion of emails for purposes of entering a judgment under Code of Civil Procedure section 664.6. As argued by Plaintiff, the court’s discussion in J.B.B. I is applicable here. (See J.B.B. I, supra, 232 Cal.App.4th at p. 991 [“a typed named at the end of an email is not, by itself, a signature under case law”].) While some courts have held that “in certain circumstances” typewritten names can satisfy the California statute of frauds, “none of these cases have involved Code of Civil Procedure section 664.6, and thus far no court has held that a printed name satisfied the strict signature requirements of this statute.” (Id. at pp. 991-992.)
J.B.B. II does not state otherwise. In that case, the appellate court found that the trial court “properly granted plaintiff’s motion for summary adjudication as to the eighth cause of action for breach of contract.” (J.B.B. II, supra, 37 Cal.App.5th at p. 15.) While in J.B.B. I, the court addressed the question of enforceability under section 664.6, J.B.B. II instead addressed a breach of contract action. (Id. at p. 13 [“[J.B.B. I.] solely addressed the question of enforceability under section 664.6… we explicitly ‘express[ed] no opinion as to whether plaintiffs can enforce … by another method’ ”].)
As far as this Court is aware, it remains true that “thus far no court has held that a printed name satisfies the strict signature requirements of this statute [Code of Civil Procedure section 664.6].” (J.B.B. I, supra, 232 Cal.App.4th at p. 992.) Defendant has not directed the Court to any authority stating otherwise. Further, “[b]ecause of its summary nature, strict compliance with the requirements of section 664.6 is prerequisite to invoking the power of the court to impose a settlement agreement.” (Sully-Miller, supra, 103 Cal.App.4th at p. 37.)
The Court accordingly DENIES Defendant’s motion to enforce the alleged settlement agreement.
III. PLAINTIFF’S MOTION
Velasquez moves for orders (A) to enforce the Court’s prior discovery order; (B) for monetary sanctions; and (C) to forego the Belaire-West procedure. ChargePoint opposes each of these requests and makes its own request for monetary sanctions.
A. Prior Order
In support of her motion, Plaintiff asserts that “[t]o date, Defendant has not complied with this Court’s [Discovery Order], and continues to refuse to do so in the mistaken belief that this case was settled.” (See Plaintiff’s motion, p. 2:9-11 (Pl.’s memo).) In opposition, Defendant asserts that it met and conferred with Plaintiff immediately after the Court’s Discovery Order, and “put in a significant amount of time and resources to identify all the staff agencies ChargePoint used,” and that “Plaintiff’s counsel agreed that ChargePoint had done its part on the due diligence.” (See Def.’s memo, p. 3: 9-10, 23.) Defendant further contends that Plaintiff’s counsel agreed to issue subpoenas to staffing agencies and failed to do so. (Id. at pp. 3:21-4:6.) Defendant also argues that Plaintiff’s counsel knew that ChargePoint did not have the number of contractors placed by the staffing agencies because it does not have a centralized system with this information. (Id. at p. 4:1-4.)
On reply, Plaintiff acknowledges that some delay in responding to the Court’s April 4, 2022 Discovery Order is “arguably justifiable, based on the time it took to dig into records relating to the worker’s engaged by Defendant through staffing agencies and the ultimate decision by Plaintiff to limit the scope of the class to those employed directly by Defendant and engaged through a single staffing agency (one of the many Defendant used).” (See Pl.’s reply, p. 2: 1-5.) Plaintiff further reiterates her arguments that there was no settlement agreement, and that the Court’s Discovery Order filed on April 4, 2022 should still be in effect. (Id. at pp. 7:18-9:17.)
Every court has the power to compel obedience to its orders. (Code Civ. Proc., § 128, subd. (a)(4).) A judicial officer has power to compel obedience to the officer’s lawful orders. (Id., § 177, subd. (b).) “Section 187 of the Code of Civil Procedure grants to every court the power to use all means to carry its jurisdiction into effect, even if those means are not set out in the code.” (NEC Electronics (1989) 208 Cal.App.3d 772, 778; see also Fairfield v. Superior Court (1966) 246 Cal.App.2d 113, 120 (Fairfield) [trial court “‘is granted broad discretionary powers to enforce its orders but is powers are not unlimited…. The sanctions the court may impose are such as are suitable and necessary to enable the party seeking discovery to obtain the objects of the discovery he seeks but the court may not impose sanctions which are designed not to accomplish the objects of discovery but to impose punishment’”].)
Here, the Discovery Order filed on April 4, 2022 clearly specifies that certain responses were due within 30 days of the filing of that Order, and others were due within 20 days of completion of the Belaire-West process. The Order described the disputed requests as follows:
SIs 1 & 2 seek contact information for Defendant’s former and current employees who are members of the putative class, while SIs 3 & 4 direct Defendant to state the total number such former and current employees. RPDs 10-21, 23 and 29 seek relevant employment policies applicable to members of the putative class. RPDs 24-25 demand all time and pay records for covered employees in their native format. Finally, RPD 27 calls for documents that explain the job descriptions and/or duties for each of ChargePoint’s hourly/non-exempt positions.
(Discovery Order, p. 2:19-25.) The Order concludes as follows:
The Court GRANTS Plaintiff’s motion to compel further responses. Defendant shall serve verified, code-compliant further responses to the requests at issue within 30 calendars days of the filing of this order as to SIs 3 & 4 and RPDS 10-21, 23, 27, and 29, and within 20 calendar days of the completion of the Belaire-West process as to the remaining requests. The responses shall be without objection, except for privilege.
Plaintiff asserts that Defendant has served no further responses in accordance with the Discovery Order. Without refuting these claims, Defendant argues that Plaintiff bears some responsibility for the delay in the Belaire-West process, a point which Plaintiff appears to acknowledge, at least in part. But, a delay in completing the Belaire-West process does not explain why Defendant failed to serve verified, code-compliant further responses as to SIs 3 & 4 and RPDs 10-21, 23, 27, and 29. Because the Discovery Order was filed on April 4, 2022, further responses to those discovery requests were due 30 calendar days later, on May 4, 2022. Defendant’s has failed to provide either (1) proof that it served such further responses; or (2) a satisfactory explanation for why it failed to do so.
Thus, the evidence presented to the Court establishes that Defendant has failed to comply with the Discovery Order filed on April 4, 2022. The Court turns now to Plaintiff’s related request for sanctions.
B. Sanctions
Plaintiff contends that, based on Defendant’s failure to comply with the Discovery Order as addressed above, Defendant should be sanctioned pursuant to Code of Civil Procedure section 2023.010, et seq. (See Pl.’s memo, p. 9:1-3.) In opposition, Defendant argues that imposition of sanctions would be unjust when Plaintiff is responsible for delays in this case. (See Def.’s opposition, pp. 7:17-8:15.) Defendant further argues that it is entitled to sanctions for having to oppose Plaintiff’s motion. (Id. at pp. 8:16-9:19.)
Code of Civil Procedure, section 2023.010, provides that failing to respond to discovery requests, evasive responses, and objections lacking substantial justification are “misuses of the discovery process.” (Code Civ. Proc., § 2023.010, subds. (d)-(f).) “Disobeying a court order to provide discovery,” is a “misuse of the discovery process.” (Id. at § 2023.010, subd. (g).) The court is authorized to award as sanctions the moving party’s reasonable expenses, including attorney’s fees on the motion to compel. (Id. at § 2023.030, subd. (a).) “Reasonable expenses” may include attorney’s fees. (Cornerstone Realty Advisors, LLC v. Summit Healthcare REIT, Inc. (2020) 56 Cal.App.5th 771, 790.) Only expenses caused by the discovery abuse are compensable. (Id. at p. 791.) “[S]anctions may not be imposed solely to punish the offending party.” (Kwan Software Engineering, Inc. v. Hennings (2020) 58 Cal.App.5th 57, 75.)
If monetary sanction is authorized by a provision of the Civil Discovery Act (Code of Civil Procedure, section 2016, et seq.), “the court shall impose that sanction unless if find that one subject to the sanction acted with substantial justification or that other circumstances make imposition of the sanction unjust.” (Code Civ. Proc., § 2023.030, subd. (a).) “[T]he phrase ‘substantial justification’ has been understood to mean that a justification is clearly reasonable because it is well grounded in both law and fact.” (Doe v. United States Swimming, Inc. (2011) 200 Cal.App.4th 1424, 1434.) One who fails to comply with a court order regarding discovery may not assert as a defense that the order was erroneous. (In re Marriage of Niklas (1989) 211 Cal.App.3d 28, 35.)
Here, Defendant makes no effort to dispute that it failed to comply with the Court’s Discovery Order filed on April 4, 2022. Instead, it offers a description of the progress of discovery after that Order, suggesting that Plaintiff is responsible for any delays. (See Def.’s opposition, pp. 3:7-6:3.) For example, Defendant points out that “not once in the three case management conference statements filed since the [April 4, 2022] Order did Plaintiff raise any issues with the Court about the timing of ChargePoint’s gathering of the class list information.” (Id. at p. 5:21-23.)
Plaintiff may bear some responsibility for delays related to the completion of the Belaire-West process. But, as discussed above, none of Defendant’s explanations provide substantial justification for its complete failure to provide further code-complaint responses (without objection except as to privilege) as to SIs 3 & 4 and RPDs 10-21, 23, 27, and 29. If, as Defendant suggests in its opposition, it was unable to provide responsive answers or documents, it nevertheless could provide code-compliant responses stating as much.
Here, Defendant has not provided substantial justification for its failure to comply with the Court’s Order. This is the second motion that Plaintiff has filed in relation to the same discovery requests, and the Court expressly stated in its prior order that it was unlikely to give Defendant the same benefit of the doubt relating to future discovery disputes. Thus, the Court must award sanctions for misuse of the discovery process of Plaintiff’s reasonable expenses pursuant to Code of Civil Procedure, section 2023.030, subd. (a). Plaintiff’s request for attorney’s fees in this respect is code-compliant, but the Court finds the requested amount $6,750.00 to be excessive.
The Court accordingly GRANTS Plaintiffs request for sanctions in the amount of $5,000. ChargePoint shall pay counsel for Plaintiff the amount of $5,000 within 10 calendar days of the filing of this order. As Plaintiff has successfully brought its motion concerning the Discovery Order, the Court DENIES Defendant’s request for sanctions.
C. Compliance with Belaire-West Process
In support of her motion, Plaintiff asserts the following: “Further, in light of the long delay and frivolous nature of Defendant’s current contention, the parties should not be required to go through the Belaire-West procedure.” (See Pl.’s memo, p. 2:13-14.) In opposition, Defendant argues that there is no factual or legal basis to “simply skip the Belaire-West procedure altogether.” (See Def.’s opposition, p. 6:20-27.) Defendant further argues that Plaintiff is responsible for the delay, stating “Plaintiff requested additional time to meet and confer on the Belaire-West process and then delayed filing her amended complaint.” (Id. at p. 7:12-13.)
It is unclear to the Court what exactly Plaintiff is requesting in asserting that the parties should not have to go through the Belaire-West process. As Defendant argues Plaintiff has presented no authority in support of the proposition to not “go through” the Belaire-West process. Further, on reply Plaintiff appears to abandon her request as she fails to address it, even arguing that she “should have an opportunity to conduct the Belaire-West procedure.” (See Pl.’s memo, p. 6:12-13.)
The Court accordingly DENIES Plaintiff’s request to forego the Belaire-West process. Counsel shall meet and confer regarding the completion of the Belaire-West process.
CONCLUSION
Defendant’s motion to enforce the settlement is DENIED. Plaintiff’s motion for monetary sanctions is GRANTED. Defendant shall pay $5,000 to Plaintiff’s counsel within 10 calendar days of the filing of this order.
The Court will prepare the order.
LAW AND MOTION HEARING PROCEDURES
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Case Name:
Case No.:
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Calendar Lines 6, 7, 8, 9, and 10
Case Name: Terra Fritch, et al. v. Universal Protection L.P., et al.
Case No.: 22CV399095
Case Name: Avery Megia, et al. v. Universal Protection Service, LP, et al.
Case No.: 22CV399096
Case Name: Vicki Lane, et al v. Universal Protection Service LP, et al.
Case No.: 22CV398848
Case Name: Firoozeh Davallou, et al. v. Universal Protection L.P., et al.
Case No.: 22CV399418
Case Name: Heather Balleza, et al. v. Universal Protection Service L.P., et al.
Case No.: 23CV413374
INTRODUCTION
On May 26, 2021, then Valley Transit Authority (“VTA”) employee Samuel Cassidy, shot and killed nine coworkers, including Alex Fritch, Paul Megia, Michael Rudometkin, and Taptejdeep Singh at a VTA facility in San Jose. The decedents’ heirs and estates have sued VTA, Santa Clara County (“the County”), and various security companies.
Currently before the court are separate demurrers filed in each case by (1) the County (“County demurrer”), and (2) Universal Protection (“Universal Protection demurrer”). Each demurrer is opposed and the moving parties have filed replies. In Lane only, VTA has filed a demurrer, which is opposed, and a reply has been filed.
BACKGROUND
As alleged in the First Amended Complaint in Fritch, VTA is a public transportation agency that operates bus and light rail services throughout Santa Clara County and employs about 2,000 workers. (First Amended Complaint (“FAC”), ¶ 1.) On May 26, 2021, a VTA employee perpetrated a mass shooting and killed a total of nine fellow employees. (Ibid.) The shooting took place at VTA’s Guadalupe Division facility which is located in the Civic Center neighborhood of San Jose. (Ibid.) Among the victims were the loved ones of the plaintiffs in these related cases.
According to dispatch audio, at 6:33 a.m. on the day of the shooting, the San Jose Fire Department received a call to respond to the Guadalupe facility, though the caller did not mention anything about an active shooter. (FAC, ¶ 2.) About a minute later, Santa Clara County authorities received 911 calls about shots being fired at the facility. (Ibid.) Sheriff’s deputies and police officers responded from their nearby offices. (Ibid.) When they arrived at about 6:35 a.m., they found multiple people shot. (Ibid.) The shooting occurred in two separate buildings at the busiest time of the day: a shift change during which employees from the overnight and morning shifts overlapped. (Ibid.) According to the Sheriff, over 100 people were at the facility at the time of the shooting. (Ibid.)
The shooting began in a conference room in Building B on the western side of the yard during a power crew meeting with the local Amalgamated Transit Union president. (FAC, ¶ 2.) The gunman then walked over to Building A on the eastern side of the facility where he continued firing. (Ibid.) At about 6:43 a.m., officers closed in on the gunman as he killed himself on the third floor of Building A between administrative offices and the operations control room. (Ibid.) The Sheriff’s office established that the gunman fired a total of 39 rounds from three semiautomatic handguns equipped with 32 high-capacity magazines. (Ibid.) This was the deadliest mass shooting in the history of the Bay Area. (Ibid.)
The gunman had a pattern of insubordination, had verbal altercations with coworkers on at least four separate occasions that were known to VTA management, and previously made death threats to coworkers. (FAC, ¶ 2.) This information was readily available to each of the defendants by virtue of their relationship with VTA. (Ibid.)
The FAC alleges that, in order to provide first rate comprehensive security and risk advisory services to prevent mass shootings, VTA entered into a contract with the defendant Universal Protection entities (“Universal Protection”) and the County of Santa Clara (through the Sheriff’s Office) for security and protective services (the “Contract”). (FAC, ¶ 3.) The total compensation VTA agreed to pay exceeds $50,000,000. (Ibid.) Through this contract, Allied and the County agreed to provide security to the facilities where the shooting occurred, and they assumed “the duty to provide security to protect VTA employees” including the Fritch Decedents. (Id., ¶¶ 4-10.)
The Fritch plaintiffs allege that “had Defendants carried out proper security screening, proper surveillance, proper risk mitigating measures and complied with security standards and practices including but not limited to the use of weapons detector systems that they were obligated to maintain[,] Defendants would have been able to prevent the shooter” from killing the Fritch Decedents. (FAC, ¶¶ 13-14.)
Based on these allegations, the Fritch plaintiffs asserted claims against Universal Protection, the County, and VTA for wrongful death.[4] In Fritch, Davallou, and Lane, Defendants successfully demurred to the wrongful death claim. Plaintiffs in those cases were granted leave to amend and they filed an amended Complaint adding a cause of action for breach of contract. In the remaining cases, Plaintiffs voluntarily amended their Complaints to address the Court’s orders in Fritch and Davallou.
DISCUSSION
I. Preliminary Matters
A. Requests for Judicial Notice
i. The County’s Request
In connection with its demurrer in each case, the County requests judicial notice of (1) this Court’s March 10, 2023 Order Sustaining County’s Demurrer to Plaintiffs’ Complaint with
Leave to Amend in the Fritch and Davallou matters, (2) a March 10, 2020 Memorandum from Sheriff Laurie Smith to County Board of Supervisors, and (3) a January 23, 2018 Order Regarding County of Santa Clara’s Motion for Summary Judgment or, in the Alternative, Adjudication in the unrelated case of Jeffrey Bodin, et al. v. County of Santa Clara, No. 2014-1-CV-268728. The County contends that items 1 and 3 are judicially noticeable as court records under Evidence Code section 452, subdivision (d) and that item 2 is the subject of judicial notice as an official governmental act or the formal enactment of a public entity under Evidence Code section 452, subdivisions (b) and (c).
The Fritch and Davallou Plaintiffs object to requests 2 and 3.[5] With respect to request 2, Plaintiffs contend that the memorandum is irrelevant and inadmissible because it is not authenticated. The Court will not rule on the objections to request 2 because the memorandum contained in that request is not material to the Court’s determination of the outcome of the demurrer.
With respect to request 3, Plaintiffs argue that the Bodin order is irrelevant and not binding on this court. The court will take judicial notice of request 3. (Evid. Code, § 452, subd. (d); Becerra v. McClatchy Co. (2021) 69 Cal.App.5th 913, 929 (Becerra) [taking judicial notice of trial court order under parallel circumstances].) However, the Court recognizes that the opinion has “no binding or precedential effect” and has “at most, some persuasive value.” (Id. at p. 929.) The Court “remain[s] mindful of the limited relevance of this material.” (Ibid.)
ii. Universal Protection’s Request
Universal Protection requests that the Court take judicial notice of the contract between itself and the VTA. This request is unopposed and is GRANTED. (Evid. Code, § 452, subd. (h); Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285 fn. 3 [taking judicial notice of documents that “form the basis of the allegations in the complaint” because “it is essential that [the court] evaluate the complaint by reference to these documents”].)[6]
iii. VTA’s Request in Connection With its Demurrer in Lane
VTA requests judicial notice of (1) this Court’s Order Sustaining VTA’s Demurrer to Plaintiffs’ Second Amended Complaint in Lane v. Universal Protection Service LP (No. 22CV398848); (2) a 2018 Order Sustaining United States Parcel Service, Inc.’s Demurrer to Plaintiffs’ Complaint with Leave to Amend in the San Francisco County case of Lefiti v. Allied Universal Security Services, Inc. (Super. Ct. San Francisco County, 2018, No. CGC-17-559883) and Judgment of Dismissal With Prejudice in Favor of UPS in the same case; and (3) the Lane Plaintiffs’ government tort claims.
Plaintiffs do not object to VTA’s request for judicial notice. The Court grants judicial notice of the first and second requests under Evidence Code section 452, subdivision (d). The second request is granted subject to the limitations in Becerra discussed above. The third request is also granted. (See Evid. Code, § 452 subd. (c); see also Gong v. City of Rosemead (2014) 226 Ca1.App.4th 363, 368, fn. 1 [“The court may take judicial notice of the filing and contents of a government claim, but not the truth of the claim”].)
B. VTA’s Objection to the Lane Plaintiffs’ Supplemental Filing
On June 16, 2023, after VTA filed its reply to the Lane Plaintiffs’ opposition to VTA’s demurrer and after the Court-imposed May 30 deadline to file the opposition, the Lane Plaintiffs filed an addendum to their opposition. VTA objects to the late-filed addendum as being filed without leave of court, urges the Court not to consider it, and moves to strike it. Even if the Court were to consider the addendum, it consists of additional evidence in the form of witness declarations, which may not be considered on a demurrer, which addresses only the allegations in the operative complaint and any matter subject to judicial notice. In any event, the main thrust of the addendum is not that the demurrer should be overruled due to the information contained therein. Instead, the addendum seeks to open discovery to allow the Lane Plaintiffs to depose the declarants prior to the Court’s ruling on the demurrer. As such, it is basically tantamount to a motion to continue the hearing on the demurrer and dissolve the stay on discovery. The Court declines to strike the addendum because it does not change the outcome of the demurrer.
C. VTA’s Motion to File Plaintiffs’ Addendum Under Seal
The Lane Plaintiffs lodged their addendum and supporting declaration of their counsel (including exhibits) conditionally under seal and VTA moves to seal both items. VTA contends that the exhibits consist of witness declarations from the ongoing law enforcement investigation into the shooting incident and that they are not available to the public. It further asserts that the declarations contain confidential employee information.
Generally, “[t]he court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d).)
The Court finds that the interest in maintaining the integrity of the ongoing investigation and in protecting confidential employee information overcomes the right of public access to the documents. Accordingly, the motion to seal is granted.
II. Legal Background
As relevant to the instant case, “[t]he party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds: . . . (e) The pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc. § 430.10, subd. (e).)[7] A demurrer may be utilized by “[t]he party against whom a complaint [ ] has been filed” to object to the legal sufficiency of the pleading as a whole, or to any “cause of action” stated therein, on one or more of the grounds enumerated by statute. (§§ 430.10, 430.50, subd. (a).)
The Court in ruling on a demurrer treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.) In ruling on a demurrer, courts may consider matters subject to judicial notice. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 751.)
III. Merits of the Demurrers
In each case, both the County and Universal Protection have filed demurrers. The County challenges counts one (wrongful death) and two (breach of contract) and Universal Protection challenges only count three (breach of contract) on the ground of failure to state a claim. Because the County and Universal Protection demurrers raise similar issues, they will be discussed together. The VTA demurrer in Lane will be addressed in its own section.
At the outset, it must be noted that, in addition to its argument that the Complaints fail to state a claim under section 430.10, subdivision (e), the County’s demurrer also raises the contention that “it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.” The supporting memorandum makes no reference to the inability to determine whether the contract was written, oral, or implied and, in fact, the contract is attached to the Complaint.
Additionally, the Court notes that the County did not file a demurrer in Balleza. The Complaint in Balleza raises the same causes of action against the County that are challenged in the other cases.
A. First Cause of Action: Wrongful Death
The County demurs to the wrongful death cause of action on the ground of failure to state a claim.[8] In Fritch and Davallou, the County successfully demurred to the wrongful death claim on the ground that it had no duty to prevent the VTA mass shooting and that it is immunized from liability by the Government Code. The Court sustained the demurrer with leave to amend and Plaintiffs in those cases have refiled the wrongful death claim against the County.
The Court will not recount the text of its prior order here. However, the order explained that the Complaint did not allege that any specific County employee took or failed to take any action resulting in harm to the decedents and, therefore, the Complaint had not alleged a wrongful death cause of action under a vicarious liability respondeat superior theory. The Complaint continues to omit such allegations and, accordingly, a vicarious liability theory is precluded.
The order also suggested that a duty might arise from a special relationship. Plaintiffs’ amended wrongful death claim alleges a special relationship arising from the contract between the County and the VTA. Thus, Plaintiffs’ claim is that the County is directly liable based on the contract.
The County asserts that even if a special relationship existed between VTA and itself, it would still be immune from the wrongful death claim under Government Code section 815 and 845. Plaintiffs maintain that governmental immunity does not apply to liability based on a contract under Government Code section 814. Government Code section 814 provides, “Nothing in this part affects liability based on contract or the right to obtain relief other than money or damages against a public entity or public employee.”
Plaintiffs rely on Western Title Guaranty Co. v. Sacramento & San Joaquin Drainage Dist. (1965) 235 Cal.App.2d 815, 823-824, in which the Court of Appeal explained that, under Government Code section 814, “public entities are not protected from liability arising out of contract by the doctrine of sovereign immunity.” But, that case addressed neither Government Code section 815 nor section 845.
The basic architecture of the [Government Claims Act (“GCA”)] is encapsulated in Government Code section 815. Subdivision (a) of that section makes clear that under the GCA, there is no such thing as common law tort liability for public entities; a public entity is not liable for an injury ‘[e]xcept as otherwise provided by statute.’ (Gov. Code, § 815; see Guzman v. County of Monterey (2009) 46 Cal.4th 887, 897.)
(Quigley v. Garden Valley Fire Protection Dist. (2019) 7 Cal.5th 798, 803.) “But even when there are statutory grounds for imposing liability, subdivision (b) of section 815 provides that a public entity’s liability is ‘subject to any immunity of the public entity provided by statute.’ (Gov. Code, § 815, subd. (b).)” (Id. at p. 804.)
The Court concludes that even if a special relationship is formed through the contract between VTA and the County, the wrongful death cause of action is not one based on statute and, the fact that a special relationship may have been formed by the contract does not remove this claim from the general rule that a governmental entity is not liable for injuries it caused unless a statute renders it liable. (See Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1131 [“a public entity may be liable for an injury directly as a result of its own conduct or omission, rather than through the doctrine of respondeat superior, but only ‘as … provided by statute.’ (Gov. Code, § 815, italics added.)”].) The County’s demurrer is sustained as to the wrongful death cause of action in each case.
“ ‘Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment. [Citation.] . . . Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading. [Citations.]” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) “Plaintiffs have the burden to show how they could further amend their pleadings to cure the defects. [Citation.]” (Carter v. Prime Healthcare Paradise Valley LLC (2011) 198 Cal.App.4th 396, 411.) Here, Plaintiffs do not explain how they could amend their Complaints to cure the defect discussed above. Accordingly, the County’s demurrer is SUSTAINED as to the wrongful death cause of action WITHOUT LEAVE TO AMEND.
B. Second Cause of Action: Breach of Contract
Both the County’s demurrer and Universal Protection’s demurrer assert that the breach of contract claim must fail because Plaintiffs’ decedents were not third party beneficiaries of the contracts between the County and VTA and Universal Protection and VTA. Section 1559 of the Civil Code provides, “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” Both demurrers also rely on Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 821 (Goonewardene), in which the California Supreme Court explained
[U]nder California’s third party beneficiary doctrine, a third party—that is, an individual or entity that is not a party to a contract—may bring a breach of contract action against a party to a contract only if the third party establishes not only (1) that it is likely to benefit from the contract, but also (2) that a motivating purpose of the contracting parties is to provide a benefit to the third party, and further (3) that permitting the third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.
Universal Protection concedes that the decedents were likely to benefit from the contract but maintains that Plaintiffs have not pled facts showing that the latter two elements are established. The County argues that all three elements are not met.
i. Element 1
The County asserts that element 1 is not met because the agreement does not mention decedents, it is unlikely that decedents were aware of the agreement, and the agreement does not indicate that third parties will be compensated for their injuries. The Court finds that the first element is met by the Complaint. The agreement between VTA and the County is attached to the Complaint and it indicates on page 11, that “[i]n order to provide for overall public safety and security for VTA’s patrons, employees, equipment and facilities, VTA has established a Transit Patrol Division, to be staffed by the Office of the Sheriff.” The County argues that this language is general and that the purpose of the agreement was for the Sheriff to assist VTA in its task of establishing the Transit Patrol Division. But, it is clear that establishment of the Transit Patrol Division and the implementation of security measures at VTA premises would be likely to provide a benefit to decedents, all of whom were employees of VTA.
ii. Element 2
With respect to the second element, the Complaint in Fritch alleges, “A major purpose of each of said contracts was to provide excellent security to protect VTA’s employees, including Plaintiffs’ decedents from violence.” (FAC, ¶ 4.) It further states, “VTA and the County of Santa Clara established workplace glides and rules prohibiting firearms in the workplace to protect its employees from violence. Fundamental to each of the security contracts between VTA, Allied and the Sheriff was the enforcement of such policies and rules prohibiting guns from being in the workplace.” (FAC, ¶ 5.) The services the Sheriff was meant to provide under the terms of the agreement include, “[p]rovid[ing] sworn law enforcement personnel to enforce all applicable state and local laws, including VTA ordinances” and “[p]rovid[ing] sworn law enforcement personnel to respond to calls for service.” (County Agreement, p. 11.)
In the Universal Protection Agreement, the scope of services provision indicates that Universal Protection is meant to provide 2200 hours of unarmed uniformed security services and 1200 hours of armed security services per week. (Universal Protection Agreement, p. 10.) The agreement also states that “Contractor must provide foot, mobile, armed and unarmed security guards as required by VTA.” It also provides that, “Contractor’s security staff will work directly with VTA employees, its contractors, volunteers, first responders, local law enforcement agencies including the Transit Patrol Division of Santa Clara County Office of the Sheriff, and the public.” (Id. at p. 13, italics added.)
It is reasonable to conclude under the circumstances that there may have been an intent on the part of the contracting parties to provide a benefit to VTA’s employees. The Court concludes that this element is sufficiently met at the pleading stage. However, both parties’ contentions on this point are more akin to arguments that the Complaints do not sufficiently allege the elements of breach of contract. This will be discussed further below.
iii. Element 3
With respect to the third element, the demurrers correctly indicate that the contracts do not provide for third party enforcement of their terms and the County and Universal Protection make various arguments regarding how allowing a third party to sue would be inconsistent with the purposes of the contracts and the parties’ expectations. Plaintiffs do not respond to these arguments, instead contending that Goonewardene does not apply because it is factually distinguishable from the instant case. There is no question that Goonewardene, which involved one company contracting with another for the performance of payroll services, is factually distinguishable from the instant case. Nonetheless, Goonewardene announced a general rule applicable to third-party enforcement of contracts. Further Goonewardene also involved a demurrer, indicating that its test applies at the pleading stage. (See also, Wexler v. California FAIR Plan Assn. (2021) 63 Cal.App.5th 55, 65-67 [applying Goonewardene test in affirming trial court’s order sustaining demurrer].) In light of the failure to plead a third party breach of contract claim that satisfied Goonewardene, the demurrers must be sustained.
Again, Plaintiffs have not stated how they might amend their Complaints to address the deficiencies discussed above. But, “[i]f the plaintiff has not had an opportunity to amend the complaint in response to the demurrer, leave to amend is liberally allowed as a matter of fairness, unless the complaint shows on its face that it is incapable of amendment. [Citations.]” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747.) The demurrers to the breach of contract causes of action are SUSTAINED with 20 day’s leave to amend.
iv. The Complaints Fail to State a Claim for Breach of Contract
“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff. [Citation.]” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
The County argues that Plaintiffs have failed to plead breach because the contract did not require them to perform the tasks Plaintiffs allege constituted the breach, such as failure to provide “security screening,” “proper surveillance,” and “proper risk mitigation procedures.” (FAC, ¶ 15.) As mentioned above, Universal Protection makes a similar argument in the context of discussing whether Plaintiffs are third-party beneficiaries of the contracts. This argument is well taken. The agreement with the County is attached to the Complaint, yet Plaintiffs point to nowhere in the contract where such services are contemplated. The agreement with Universal Protection is not attached to the Complaints and the Complaints do not indicate that the terms of the contract required these actions.[9] While the Complaints do allege that the failure to perform these items constituted a breach, it stands to reason that there is no breach if the contracts do not call for performance of these items.
The demurrers to the breach of contract causes of action are SUSTAINED with 20 day’s leave to amend.
v. Universal Protection’s Argument that the Fritch and Davallou Plaintiffs Improperly Added a Breach of Contract Claim as to It
Universal Protection also argues in Fritch and Davallou that the breach of contract claim is improper as to it because the Court’s order sustaining the County’s demurrer did not allow Plaintiffs to allege a breach of contract claim against it. Although the Court need not necessarily address this issue since the demurrer will be sustained as to the breach of contract cause of action, it will nonetheless do so because it will grant leave to amend.
Universal Protection is correct that when a demurrer is sustained with leave to amend, the leave must be construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.) Absent prior leave of court an amended complaint raising entirely new and different causes of action may be subject to a motion to strike. (See Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [“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.”])
The Court will not sustain the demurrer on this ground. Although the Court’s order did not expressly allow Plaintiffs to allege a breach of contract claim against Universal Protection, it is clear that the Court contemplated that a breach of contract would be added to the Complaint. Further, Universal Protection initially waived this argument when Plaintiffs asked if it would “stipulate to the claim” and it agreed. Finally, to the extent Universal Protection seeks to challenge the filing of the new breach of contract claim without leave of court, the proper procedural vehicle is a motion to strike, not a demurrer. However, Plaintiffs are cautioned that the instant order sustaining the demurrer as to the breach of contract cause of action with leave to amend does not allow Plaintiffs to add additional causes of action to their Complaints.
C. The Arguments Regarding Remedies May Not Be Raised on Demurrer
Universal Protection argues that the Complaints improperly seek tort damages for the non-tortious breach of contract claim. But, the law is well established that “a demurrer tests the sufficiency of the factual allegations of the complaint rather than the relief suggested in the prayer of the complaint.” (Venice Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547, 1562.) Stated alternatively, “[a] prayer for relief cannot be the subject of demurrer.” (Neblett v. Neblett (1936) 13 Cal.App.2d 304, 306; see also Grisingher v. Shaeffer (1938) 25 Cal.App.2d 5, 9 [“Objections to the prayer of a complaint cannot be taken by demurrer.”].) Accordingly, this argument must be rejected.
The County also argues that the Complaints improperly seek tort damages when breach of contract is only tortious when it violates a duty independent of the contract. It contends that third parties may only enforce the contract as written and they do not have great rights than parties to the contract. This argument must be rejected for the same reason as Universal Protection’s remedies argument.
D. Universal Protection’s Request to Continue the Discovery Stay
In its memorandums of points and authorities in support of its demurrers, Universal Protection seeks an order continuing the discovery stay in each case until August 2023. The court declines to issue such an order in the context of a demurrer particularly where no authority is provided and the notice of demurrer does not request such relief. The request to continue the discovery stay is DENIED without prejudice to making a noticed motion for the same relief.
E. VTA’s Demurrer
In Lane, the VTA demurs to causes of action 1 through 7 on the grounds that the court lacks subject matter jurisdiction over the claims (§ 430.10, subd. (a)) and failure to state a claim (§ 430.10, subd. (e)). The third amended complaint in Lane raises eight causes of action: (1) wrongful death; (2) assault; (3) battery; (4) false imprisonment; (5) negligent hiring, retention, or supervision; (6) violation of the Bane Act; (7) fraud and deceit; and (8) breach of contract.[10]
With respect to causes of action 1 through 7, VTA contends that the California’s Workers’ Compensation Act (Labor Code §§ 3200 et seq.). This Court previously sustained VTA’s demurrer on the ground of Worker’s Compensation exclusivity. Again, the Court will not recount the entirety of its prior order sustaining VTA’s demurrer. Plaintiffs argue that the question of Worker’s Compensation exclusivity is a factual question reserved for the jury, they assert that Cassidy’s and VTA’s actions in this case fall outside of the compensation bargain. But, this court rejected those arguments in connection with VTA’s previous demurrer. Plaintiffs’ minimal additions to the third amended complaint provide no basis for the court to reconsider those rulings.
The main additional facts alleged in the third amended complaint are: (1) that Cassidy acted as an agent for VTA during the shooting incident and (2) that VTA ratified Cassidy’s conduct after the fact by conducting a sham investigation designed to conceal evidence that it authorized or ratified Cassidy’s actions.
With respect to the first new additional fact, Plaintiff contends that this allegation is sufficient to plead that the tortious conduct was attributable to VTA as the employer. They rely on Meyer v. Graphic Arts International Union (1979) 88 Cal. App. 3d 176 (Meyer), in which the Court of Appeal held that an agency relationship is sufficient to hold an employer civilly liable for the actions of an another employee in the course of employment. Meyer has been criticized in later opinions. In Fretland v. County of Humboldt (1999) 69 Cal.App.4th 1478, 1488-1489 (Fretland), the Court of Appeal stated,
[T]he only case Fretland cites which holds that agency principles can be applied to hold an employer civilly liable for the intentional torts of another employee committed in the course of employment is Meyer v. Graphic Arts International Union (1978) 88 Cal. App. 3d 176, 178-179 (Meyer).) However, Meyer is not persuasive to us because the court’s terse analysis does not even mention [Labor Code] section 3601, subdivision (b), which expressly limits the liability of an employer for the willful acts of its employees.
This Court agrees with the Fretland court. VTA persuasively argues that if mere conclusory allegations of an agency relationship by itself were sufficient to establish employer liability for the willful acts of an employee, the exception would swallow the rule as every employee is an agent of the employer.
That said, Plaintiff now also alleges that ratification occurred when VTA engaged in a sham investigation after the shooting designed to cover up its authorization and/or ratification of Cassidy’s conduct. In C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4th 1094, 1112, the Court of Appeal found the allegations of ratification sufficient where
The first amended complaint alleges: Mr. Gaspar was an agent and employee of defendant; Mr. Gaspar was acting at all times on behalf of defendant; all acts or omissions alleged in the first amended complaint were ratified by defendant; during a two-to-three-year period, several of defendant’s ‘managing agents and supervisors’ knew Mr. Gaspar was sexually abusing patients and ‘refused to take any action’; the managing agents and supervisors ‘hid’ this information so Mr. Gaspar could continue to work for it; while this was occurring, Mr. Gaspar sexually assaulted a female employee and the information was ‘hid’ so he could continue his employment; with knowledge of Mr. Gaspar’s sexual misconduct, no disciplinary action was taken and he was allowed to be alone with women who were patients; and defendant intentionally or negligently “spoiled evidence” including destroying documents concerning other sexual assaults in order to conceal them from plaintiff. The foregoing allegations that defendant, with knowledge of Mr. Gaspar’s misconduct, continued to employ him and destroyed documents was sufficient to state a claim that it ratified his sexual misconduct.
Here, similarly, the third amended complaint alleges that VTA was aware of a threat made by Cassidy to one of the victims that he would “put a bullet” in his head, that employees feared that Cassidy would “go postal”, and that VTA did nothing to investigate threats by Cassidy or to discipline him or protect his fellow employees. (Third Amended Complaint, ¶ 12(l)&(m).) These allegations coupled with the allegation that VTA engaged in a sham investigation to cover up its authorization and/or ratification of Cassidy’s actions would appear to be sufficient to plead ratification. Accordingly, the demurrer is overruled to the extent it relies on the theory of Worker’s Compensation exclusivity.
VTA makes additional arguments regarding the Bane Act and fraudulent concealment claims. With respect to the Bane Act claim, VTA argues that such claims may only be raised by the person who suffered the violation. As explained in Bay Area Rapid Transit Dist. v. Superior Court (1995) 38 Cal.App.4th 141, 144, “Civil Code section 52.1 provides that a person may bring a cause of action ‘in his or her own name and on his or her own behalf’ against anyone who ‘interferes by threats, intimidation or coercion, with the exercise or enjoyment’ of any constitutional or statutory right.” The Court of Appeal explained that is relief is “limited to plaintiffs who themselves have been the subject of violence or threats” and stated, “The Bane Act is simply not a wrongful death provision. It clearly provides for a personal cause of action for the victim of a hate crime.” (Ibid., see also City of Simi Valley v. Superior Court (2003) 111 Cal.App.4th 1077, 1085.) The Lane Plaintiffs cite to federal cases which have allowed Bane Act claims to be prosecutor by successors in interest. But, as VTA correctly points out, this Court is bound by the California authorities to the contrary. (See Cuccia v. Superior Court (2007) 153 Cal.App.4th 347, 353 [“Pursuant to Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, the decisions of every division of the District Court of Appeal are binding on all superior courts of this state.”; Ritschel v. City of Fountain Valley (2006) 137 Cal.App.4th 107, 120 [“The ‘[d]ecisions of lower federal courts interpreting federal law are not binding on state courts. [Citation.]’ [Citation.]”].) The demurrer is SUSTAINED as to the Bane Act claim without leave to amend.
VTA also maintains that the fraudulent concealment claim is subject to demurrer because it is not pled with the requisite specificity, because it is barred by VTA’s claim of immunity, and that this claim was not raised in the Lane Plaintiffs’ initial complaints under Government Code section 910.
“In order to state a claim for fraud, a plaintiff must plead the following elements: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 (Lazar)) “Fraud actions are subject to strict requirements of particularity in pleading. … Accordingly, the rule is everywhere followed that fraud must be specifically pleaded.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) This necessitates pleading facts which show “how, when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at 645.) The Court finds that the third amended complaint fails to plead fraud with the required specificity. Because VTA’s remaining arguments depend on what exactly has been alleged, the Court will not address them at this time.
The demurrer is SUSTAINED with 20 days’ leave to amend.
CONCLUSION
The County’s demurrers are SUSTAINED as to the wrongful death cause of action without leave to amend. The County’s and Universal Protection’s demurrers are SUSTAINED as to the breach of contract cause of action with 20 days’ leave to amend. VTA’s demurrer is SUSTAINED without leave to amend as to the Bane Act claim and SUSTAINED with 20 days’ leave to amend as to the fraudulent concealment claim. As to all other claims, VTA’s demurrer is OVERRULED. VTA’s motion to strike the Lane Plaintiffs’ addendum is DENIED. VTA’s motion to seal the addendum and accompanying declaration is GRANTED.
LAW AND MOTION HEARING PROCEDURES
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Case Name: Seth Rogers v. iTy Labs Corp., et al.
Case No.: 17CV306546
Plaintiff Seth Rogers brings this action for business torts, breaches of fiduciary duties, and related claims against: a) his former business partner Jose Cong; b) iTy Labs Corp., the company he and Mr. Cong created; c) a new investor in iTy, which is Innogy New Ventures LLC (“Innogy NV”) but is now called FEV US LLC (“FEV”); and d) FEV’s parent company, which is Innogy SE.[11]
Before the Court is FEV’s motion for summary judgment, or in the alternative, summary adjudication. iTy and Mr. Cong move to join FEV’s motion for summary judgment/adjudication. Mr. Rogers opposes the motion. For the reasons discussed below, the Court GRANTS FEV’s motion for summary judgment. The Court also GRANTS Mr. Cong and iTy’s request for summary adjudication.
I. BACKGROUND
A. Factual
According to the allegations of the operative Fourth Amended Complaint (“4AC”), Plaintiff and his business partner Michael Mintz formed iTy in September of 2014 in San Francisco, with the plan to provide workforce management software to companies of all sizes. (4AC, ¶ 12.) Plaintiff developed the intellectual property that was used in iTy’s software “Plause.” (Ibid.) In May of 2015, Plaintiff partnered with Mr. Cong to restructure iTy, and they incorporated the company in Delaware with the understanding that Plaintiff would provide the intellectual property and Mr. Cong would act as the face of the company by securing additional business and financing. (Id., ¶ 16.) On May 7, 2015, Plaintiff purchased 2,000,000 shares of common stock in iTy through a Common Stock Purchase Agreement (“SPA”), in exchange for the transfer of his intellectual property and $20. (Id., ¶ 17.)
iTy raised a first round of financing in July and August of 2015, with angel investors, including Mr. Cong, joining a single initial investor in the company. (4AC, ¶ 18.) In August and September of 2016, iTy obtained additional funding, including through two Convertible Promissory Notes executed by Plaintiff. (Id. at ¶ 20.) Under Paragraph 2 of the Promissory Notes, Plaintiff’s principal investment may be converted to stock, including preferred stock, upon the satisfaction of certain conditions. (Id. at ¶ 21.) Under Paragraph 5, iTy may not prepay the Promissory Notes without penalty absent the written consent of a majority in interest of holders of convertible promissory notes issued by iTy. (Ibid.)
1. Mr. Cong Misleads Plaintiff and Takes Control of iTy
Shortly after Plaintiff executed the last of the two Promissory Notes on September 14, 2016, iTy again ran out of money. (4AC, ¶ 23.) Plaintiff could not afford to invest in any more bridge loans, and (at least to Plaintiff’s knowledge) Mr. Cong had no business near closing. (Ibid.) Facing these issues, Plaintiff and, purportedly, Mr. Cong aggressively pursued acquisitions by any and all suitors. (Ibid.)
But despite iTy’s past success at securing funding and highly successful beta trials, and for reasons that were unclear to Plaintiff, Mr. Cong was surprisingly unable to make headway on long-term financing. (4AC, ¶¶ 24–27.) Although investors showed interest in participating in or even leading iTy’s Series A funding, Mr. Cong found supposed problems with every possible financing deal and found reasons to scuttle all of them, including an offer by Emergence Capital to lead a funding round. (Id., ¶ 28.) Mr. Rogers used his own connections to set up meetings with potential acquirers but Mr. Cong inexplicably and repeatedly failed to attend. (Id., ¶ 29.) This was because, unbeknownst to Plaintiff, Mr. Cong was already meeting with Mr. Hess and Innogy SE, beginning in the summer of 2016. (Id., ¶ 30.)
In about August of 2016, Mr. Cong and Mr. Rogers visited the offices of “Intertrust” so that—according to Mr. Cong—they could take “founder photos” in an impressive office. (4AC, ¶ 31.) When the photo session was concluded, a high-level Intertrust executive and others whom Mr. Rogers did not recognize—but now believes may have been representatives of Innogy—summoned Cong into a conference room at Intertrust to meet, excluding Mr. Rogers from the 30–90 minute meeting (which he assumed was a social meeting between old friends from prior business dealings). (Ibid.) Mr. Cong alleges on information and belief that Mr. Hess, Mr. Cong, and representatives of Innogy all participated in or were represented in this meeting and witnessed, condoned, and supported Mr. Rogers’s exclusion from the meeting. (Id., ¶ 32.) Beginning in the summer of 2016, Mr. Cong, Innogy SE, Innogy NV, and Mr. Hess worked together to actively conceal their ongoing meetings and communications from Mr. Rogers, in order to ensure that Mr. Rogers could neither insist that iTy maximize shareholder value in deciding on an iTy investor other than Innogy SE and Innogy NV nor prevent those entities from restructuring and reorganizing iTy to the sole benefit of Innogy SE and its NWoW program. (Id., ¶ 33.) In September 2016, while Mr. Rogers remained an officer, director, and lead employee at iTy, and while Mr. Cong, Mr. Hess, Innogy NV, and Innogy SE continued to hide Innogy’s involvement from Mr. Rogers, Innogy-affiliated entities began to use the Plause Software in Europe, unbeknownst to Mr. Rogers. (Id., ¶ 34.) Innogy became iTy’s primary customer and primary source of funding since Mr. Cong had rejected all other deals and positioned Innogy as Ty’s “savior,” giving Innogy de facto control over iTy beginning in at least September 2016. (Id., ¶ 36.) Mr. Rogers was terminated as an employee and locked out of the iTy systems in the same month. (Id., ¶ 37.) Immediately thereafter, Innogy became iTy’s primary source of legal and strategic support for the dispute with Mr. Rogers. (Ibid.)
By October 11, 2016, with Plaintiff believing that iTy had no money, no imminent business, and no one to acquire the company, he and Mr. Cong agreed to dissolve and wind up iTy. (4AC, ¶ 27.) However, at no time did Plaintiff resign from his position with the company. (Ibid.) Mr. Cong falsely told Plaintiff that he expected that iTy would not be able to secure funding and would need to be closed or kept afloat solely with Mr. Cong’s continued investments. (Ibid.) Plaintiff “made clear that he would approve of Cong’s solo funding only under certain conditions, that his primary concern was for the company’s IP, employees, and investors, and that he would not allow Cong to convert iTy and its assets into a shell for a glorified consulting venture by Cong.” (Ibid.) Plaintiff and Mr. Cong ultimately agreed to close iTy and sell off its considerable assets, but Plaintiff would not have done this if he had been aware of the prospect of funding from Innogy. (Ibid.)
Following his agreement with Mr. Cong, Plaintiff understood that iTy was being wound up with the assistance of its corporate counsel Wilson Sonsini Goodrich & Rosati (“WSGR”). (4AC, ¶ 39.) He communicated this understanding by email to iTy’s counsel at WSGR and specifically requested to be included on any discussions of company business while he remained a director. (Ibid.) However, on October 11, 2016, Plaintiff received notice that he had been “terminated” from employment with iTy. (Id., ¶ 40.) He immediately protested the legality and propriety of this “termination,” but Mr. Cong falsely assured him that “no one fired” him and that iTy was “just keeping with cleaning up process,” as it tried to determine if and how the company could survive. (Ibid.) Plaintiff received no communications from Mr. Cong, iTy, or WSGR for several weeks; however, at a social gathering in November of 2016, he learned that Mr. Cong was continuing to secretly operate iTy without his consent, excluding him from all company dealings, communications, and decisions. (Ibid.) From this point through March 2017, Mr. Cong, Mr. Hess, Innogy NV, and Innogy SE had extensive communications in furtherance of removing Mr. Rogers from the equation so to further their plan to reorganize and restructure iTy for the benefit of Innogy SE and NWoW. (Id., ¶¶ 41–53.)
Mr. Cong ultimately (a) hired a sales manager, (b) solicited bids for a new round of investors, (c) entered into term sheets with investors, (d) failed to lay off all iTy employees, (e) closed the company’s physical office, (f) restructured salary, and (g) added features to Plause. (4AC, ¶ 54.) He revoked Plaintiff’s access to the company email and Google apps and refused to restore it despite multiple requests. (Id., ¶ 55.) He orchestrated the removal of Plaintiff from the board of directors in January of 2017, using stockholder written consent. (Id., ¶ 56.) “This removal was effectuated at the behest of … Innogy NV and Innogy SE, who insisted that Rogers be removed from his directorship prior to their investment. … INNOGY’s desire to remove Rogers was also used as a cudgel by Cong to convince reluctant shareholders to support his removal vote.” (Id., ¶ 33.) On March 19, 2017, Mr. Cong caused all of Plaintiff’s unvested shares to be repurchased. (Ibid.)
On March 20, 2017, Mr. Cong passed a resolution reducing the board to one directorship, making himself the only remaining director of iTy; removed Plaintiff from all officer positions, appointing himself secretary and treasurer; and increased the total number of shares in iTy to 11 million in common stock and 4,792,788 shares of “Series A Preferred Stock.” (4AC, ¶¶ 57–61.) Mr. Cong authorized a “management rights letter” with FEV in connection with the sale and issuance of the shares, and expanded the Board to three directors: Mr. Cong, a director “designated by Innogy,” and an additional director. (Id., ¶¶ 62–63.) The first director FEV designated was its employee, Mr. Hess, and Plaintiff alleges on information and belief that Mr. Hess and Mr. Cong, as the only board members, have steered iTy to act in FEV’s and/or Innogy SE’s interests since March 20, 2017, consistent with the scheme they had been developing since the summer of 2016. (Id., ¶ 64.) Also, on March 20, 2017, FEV purchased 625,000 shares of Series A preferred stock. (Id., ¶ 65.)
2. FEV and Mr. Cong Become Majority Shareholders
On September 21, 2017, FEV purchased a further 549,568 shares of Series A preferred stock, bringing its total shares to over 1 million, so that FEV and Mr. Cong were the majority shareholders of iTy’s Series A preferred stock. (4AC, ¶¶ 66–67.) This dramatically diluted Plaintiff’s holdings, despite his reasonable expectations and agreement with Mr. Cong to maintain the same levels of iTy ownership through identical stock purchases and convertible note executions. (Id., ¶¶ 69–71.)
Plaintiff also alleges that defendants “devalued Rogers’ Series A ownership entitlement under the Promissory Notes” through some method, either by wrongfully procuring “the necessary votes to pre-pay the Promissory Notes to single out Rogers” or by converting the Promissory Notes “into an amount of Series A Preferred shares in iTy that was less than the amount to which Rogers was entitled pursuant to the terms of the Promissory Notes themselves and/or his various agreements with Cong.” (4AC, ¶ 22.) If through conversion, defendants acted through a restructuring that de-valued the holdings of all minority shareholders, through a restructuring that de-valued Mr. Rogers’s shares specifically, or by “making up a number of Series A Preferred shares for Rogers out of whole cloth.” (Ibid.)
In May of 2018, unbeknownst to Plaintiff, Mr. Cong and Mr. Hess created a European subsidiary for Plause, Plause EU. (4AC, ¶ 72.) Arndt Brandenberg, a FEV and/or Innogy SE employee, was authorized by Mr. Hess to “represent” iTy “in any way whatsoever” in connection with Plause EU, and Plause EU’s five “consultant employees” were all employees of FEV and/or Innogy SE. (Id., ¶¶ 72–73.) iTy was therefore obligated to compensate FEV, its majority shareholder, and/or its parent corporation, on a quarterly basis for their services. (Id., ¶ 73.)
Meanwhile, Plaintiff made multiple requests for access to iTy’s financial books and records, minutes, and other documentation, but Mr. Cong and WSGR have refused these requests. (4AC, ¶¶ 74–75.) On November 30, 2018, Plaintiff sent a letter informing Mr. Cong he would notice a shareholder meeting for January 30, 2019 and requesting shareholder information and financial documents. (Id., ¶¶ 76–78.) Unbeknownst to Plaintiff, Mr. Cong and Mr. Hess held a board meeting at WSGR in which they discussed dissolving the company, and on January 19, 2019, WSGR sent Plaintiff limited financial information, told him that iTy would cease operations and dissolve by the end of January, and requested that Plaintiff drop his request for a stockholder meeting. (Id., ¶¶ 79–80.) Plaintiff responded that he intended to proceed with the meeting and requested additional information. (Id. ¶¶ 81–84.)
The meeting was delayed by Mr. Cong until February 20, 2019, at which point Mr. Cong told shareholders that iTy’s commercial contract with “Innogy” was its only viable contract and Innogy was the only user of its software, but indicated that iTy was still trying to close other deals because there were no prospects for a sale. (4AC, ¶¶ 87–89.) Mr. Cong confirmed that iTy owed hundreds of thousands of dollars to “Innogy,” which it had hired to service iTy’s contract with PG&E, even though “Innogy” was also iTy’s main customer. (Id., ¶¶ 90–91.) Mr. Cong refused to state whether “Innogy,” as iTy’s largest creditor, would receive all of its assets upon dissolution. (Id., ¶ 95.)
Over the several years that Cong and FEV/Innogy SE ran iTy, they engaged in substantial self-dealing for the benefit of FEV/Innogy SE and to the detriment of iTy’s minority shareholders, including a Services Agreement between FEV/Innogy SE and iTy, contracts awarded and software services provided to FEV/Innogy SE, and proprietary technology and business goodwill funneled to FEV/Innogy SE. (4AC, ¶ 97.) FEV/Innogy SE and Mr. Cong restructured iTy’s finances through the creation of Plause EU and a series of contracts that entirely changed iTy’s business model to preference FEV/Innogy SE. (Ibid.) They focused all of iTy’s operations on a single deal with PG&E, for which iTy would pay FEV/Innogy SE personnel to actually execute the contract. (Id., ¶ 98.) This deal funneled most of the revenue it generated from PG&E through iTy to FEV/Innogy SE, but did not condition iTy’s payments to FEV/Innogy SE on payment by PG&E, despite the fact that PG&E’s bankruptcy was imminently foreseeable at the time the deal was made. (Ibid.) Ultimately, PG&E filed for bankruptcy on January 29, 2019, and iTy sold its receivables from PG&E for approximately eighty cents on the dollar, entirely eliminating its own margin on the PG&E deals. (Ibid.) And rather than keeping these funds for itself or its minority shareholders, iTy paid the last of its money to FEV/Innogy SE, “nearly a million dollars, in the most egregious of what amounts to a series of improper dividends paid to a single shareholder.” (Id., ¶ 99.)
Plaintiff alleges upon information and belief that FEV/Innogy SE is currently developing a project called “Cultim8” using iTy’s core intellectual property, which was developed by Plaintiff. (4AC, ¶¶ 100–102.) Mr. Cong, Mr. Hess, and FEV/Innogy SE’s actions have all been fueled by FEV/Innogy SE’s desire to obtain iTy’s assets, including the intellectual property created by Plaintiff. (Id., ¶ 102.) Plaintiff alleges that Defendants acted as one another’s agents (id. at ¶ 8) and that FEV is a wholly owned subsidiary of Innogy SE and is its alter ego (id., ¶¶ 103–106).
Based on these allegations, Plaintiff asserts claims for (1) fraud/intentional misrepresentation (against Mr. Cong), (2) concealment (against Mr. Cong), (3) negligent misrepresentation (against Mr. Cong), (4) breach of fiduciary duty (against Mr. Cong, FEV, and Innogy SE), (5) breach of oral contract (against Mr. Cong), (6) unjust enrichment (against Mr. Cong), (7) declaratory relief (against all defendants), (8) compliance with Corporations Code sections 1601 and 1602 (against Mr. Cong); (9) injunctive relief (against all defendants), (10) breach of fiduciary duty to minority shareholders (against Mr. Cong, FEV, and Innogy SE), (11) violation of Business & Professions Code section 17200 (the “UCL”) (against Mr. Cong, FEV, and Innogy SE), (12) breach of fiduciary duty (against Mr. Cong and Mr. Hess as directors of iTy), (13) violation of the UCL (against Mr. Cong and Mr. Hess as directors of iTy), and (14) aiding and abetting breach of fiduciary duties (against all defendants).
B. Procedural
Mr. Rogers filed his original complaint in this action on February 17, 2017, naming iTy and Mr. Cong as defendants. iTy and Mr. Cong moved to stay the action pursuant to Code of Civil Procedure sections 410.30 and 418.10, urging that the mandatory forum selection clause in iTy’s certificate of incorporation required all of Plaintiff’s claims to be heard in Delaware. Mr. Rogers responded that the SPA’s mandatory forum selection clause required that all of his claims be heard in California. In an order filed on July 7, 2017, the Court (Judge Kuhnle) found that two claims in the original complaint were covered by the forum selection clause in the SPA and should remain in California, while the other claims must proceed in Delaware. The Court stayed the present action to allow litigation in Delaware to proceed first.
Mr. Rogers appealed, and on February 14, 2019, the Court of Appeal reversed the order granting the stay and remanded the matter. (See Rogers v. iTy Labs Corp. (Cal. Ct. App., Feb. 14, 2019, No. H045347) 2019 Cal. App. Unpub. LEXIS 1095 (“DCA Opinion”).) The action was reassigned to Department 1 and Plaintiff filed the First Amended Complaint (“FAC”)—which added FEV, Innogy SE, and Mr. Hess as defendants—pursuant to a stipulated order.
On September 9, 2019, Mr. Cong and iTy again moved to stay the action pursuant to the forum selection clause in iTy’s certificate of incorporation. In November 2019 (“November 2019 Order”), the Court (Judge Walsh) granted the motions to stay with respect to the first through third, fifth, sixth, twelfth, and thirteenth causes of action. The Court denied the motion in all other respects, allowing the remaining claims to proceed in California.[12] In an order filed on August 11, 2020, the Court (Judge Walsh) overruled FEV’s demurrer to the seventh, ninth, tenth, and eleventh causes of action in the FAC.
After discovery by both sides, FEV filed a motion for summary adjudication of the tenth and eleventh causes of action for breach of fiduciary duty and violation of the UCL on the ground that these are derivative claims owned by iTy, not direct claims, and Plaintiff has not satisfied the requirements to bring a derivative action. (That argument was not raised in FEV’s 2020 demurrer to these claims.) FEV also moved for summary adjudication of the ninth cause of action as dependent on these other claims. On September 17, 2021 the Court granted the motion, construed as one for judgment on the pleadings.
In December 2021, the Court granted Plaintiff’s motion for leave to file a Third Amended Complaint (“TAC”). FEV demurred to the fourth, ninth, tenth, eleventh, and fourteenth causes of action. In an order filed on April 4, 2022 (“April 2022 Order”), the Court sustained the demurrer to the fourth and fourteenth causes of action for breach of fiduciary duty and aiding and abetting breach of fiduciary duty on the ground that the TAC failed to state a claim against FEV arising from its actions before investing in iTy. But it granted leave to amend. The Court overruled FEV’s demurrer to the ninth, tenth, and eleventh causes of action and directed FEV to file a motion for judgment on the pleadings after Plaintiff filed his 4AC if it wished to make another legal challenge to these claims.
Plaintiff filed the 4AC on May 4, 2022, and FEV subsequently demurred to the fourth (breach of fiduciary duty) and fourteenth (aiding and abetting breach of fiduciary duty) causes of action and filed a motion for judgment on the pleadings as to the ninth (injunctive relief), tenth (breach of fiduciary duty to minority shareholders) and eleventh (violation of UCL) causes of action. The Court overruled the demurrer and denied the motion for judgment on the pleadings.
II. iTY AND CONG’S JOINDER REQUEST
iTy and Mr. Cong move to join in FEV’s motion for summary judgment/adjudication, which is opposed by Plaintiff on the grounds that the format utilized by iTy and Mr. Cong is “unauthorized, confusing, and illegible.” This assertion is unfounded.
A party moving for summary judgment is required to include a separate statement in his or her supporting papers which sets forth all of the materials facts which her or she contends are undisputed. (Code Civ. Proc., § 437c, subd. (b).) This requirement extends to a defendant who moves to join in another party’s motion for summary judgment/adjudication; that is, such a defendant is obligated to submit their own separate statement in support of the motion. (See Frazee v. Seely (2002) 95 Cal.App.4th 627, 636.) Here, Mr. Cong and iTy have filed such a statement. They have also filed a memorandum in support of his joinder request, which Plaintiff objects to, arguing that if these defendants are truly joining in FEV’s motion, a separate opposition is not required or even permitted.
The Court is not persuaded that there is anything noncompliant about iTy and Mr. Cong’s papers. Their supporting memorandum does not add anything substantive to FEV’s motion, but rather merely cites those portions of FEV’s motion which are relevant to Plaintiff’s claims as asserted against him in particular. Consequently, iTy and Mr. Cong’s joinder request is GRANTED.
III. FEV’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION
A. Preliminary Issues
1. “Causes of Action” Subject to Summary Adjudication
In its notice of motion, FEV moves for summary judgment as to the 4AC. Alternatively, FEV seeks adjudication of each of the claims asserted against it (the fourth, seventh, ninth, tenth, eleventh and fourteenth causes of action), as well as various “claims for damages” subsumed within the fourth, fourteenth and tenth causes of action. Under the summary judgment statute, the only “claim for damages” that may be summarily adjudicated in the absence of a stipulation and court order to that effect (see Code Civ. Proc., § 437c, subd. (t)) is that specified in Civil Code section 3294, i.e., punitive damages. However, upon review of the “claims for damages” set forth in FEV’s notice, it is clear that it is not seeking adjudication of such damages, but rather adjudication of what it views as separate and distinct wrongful acts combined in the same “cause of action.”
In Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848, the Court of Appeal held that the summary judgment statute permits a party to seek adjudication of “separate and distinct wrongful acts which are combined in the same cause of action.” (Lilienthal, 12 Cal.App.4th at 1854-1855.) Whether a complaint asserts one or more causes of action for pleading purposes depends on whether it alleges invasion of one or more primary rights. (Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1257-1258.) “The primary right theory is a theory of code pleading that has long been followed in California. It provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty. [Citation.] The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action.” (Crowley v. Katleman (1994) 8 Cal.4th 666, 681.)
Here, it is FEV’s contention that the fourth and fourteenth causes of action allege separate and distinct legal theories by which the iTy Defendants breached their fiduciary duty to Plaintiff, while the tenth alleges separate and distinct theories of breach by Mr. Cong. Upon review, the Court agrees. In the fourth cause of action, for example, Mr. Rogers alleges that FEV breached its fiduciary duty by (1) improperly converting or repurchasing Mr. Rogers’ promissory notes, (2) removing Mr. Rogers from the iTy’s Board of Directors, (3) Mr. Cong continuing to operate iTy and seeking funding, (4) terminating Mr. Roger’s employment, (5) using a secret term sheet, (6) creating or exploiting conflicts on the iTy Board, (7) seizing control of iTy’s assets and business and (8) failing to deliver business reports to Plaintiff. Each of these incidents is separate and distinct and by itself could amount to a breach of fiduciary duty, and allowing each to be summarily adjudicated (if the entire “cause of action” is not disposed of) furthers the legislative intent discussed in detail by the court in Lilienthal.
2. Controlling Law
The next preliminary issue to address is which law applies to the claims at issue.[13] FEV maintains that Delaware law applies due to iTy having been incorporated in Delaware. (FEV’s Separate Statement of Undisputed Material Facts in Support of Motion for Summary Judgment/Adjudication (“SSUF”) No. 33.) Generally, because only one state is to have the authority to regulate the affairs of a corporation, the “internal affairs doctrine” requires application of the law of the state of incorporation to any dispute regarding relations between the corporation and its shareholders or officers and directors. (See Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1106, fn. 2.) It is undisputed that iTy is a Delaware corporation, and therefore the Court is inclined to agree with FEV that Delaware law applies here. (See FEV’s Separate Statement of Undisputed Material Facts in Support of Motion for Summary Judgment/Adjudication (“SSUF”) No. 33.) Nevertheless, Plaintiff insists that California law applies via application of California Corporations Code section 2115.
Corporations Code section 2115 (“Section 2115”) has been distilled thusly: “California law governs certain internal affairs of a foreign corporation if more than half of the corporation’s voting stock is held by California residents, and the corporation conducts a majority of its business in the state (as measured by assets, payroll, and sales).” (State Farm Mutual Automobile Ins. Co. v. Superior Court (2003) 114 Cal.App.4th 434, 448.) In order to determine the foregoing, courts look to the corporation’s tax returns. However, because the “need to look at [the returns], plus common sense, dictates that the applicability of California law to a given action by the board of an out-of-state corporation can only kick in after a certain lag time” (Kruss v. Booth (2010) 185 Cal.App.4th 699, 719), California courts have created the following formula to ascertain the day upon which California internal affairs law applies to the out-of-state corporation: “Take the first full year in which the business-voting stock standard for an out-of-state corporation is met- year 1; then, the next full year- year 2- count 135 days; and then finally, the very first day of the next full year, year 3, is the very first day in which California internal affairs law applies. …” (Id., at 721.)
Here, FEV counters that Section 2115 does not apply for two reasons: (1) it does not usurp Delaware law; and (2) it does not apply to iTy on its terms. To its first argument, FEV argues that the statute does not include the rights and duties of stockholders duties of stockholders vis-a-vis fiduciaries or the corporation itself, or the basis for any other claim in this case, on the list of items for which it would usurp the law of the State of incorporation. Further, it continues, Section 2115 is unconstitutional if it purports to require cumulative voting for a Delaware Corporation.
Ultimately, the Court need not consider the constitutionality of Section 2115 as applied here because, as FEV maintains, the statute does not apply to iTy on its terms. iTy was incorporated on May 4, 2015. (SSUF No. 33.) Its first full income year was 2016 and 135 days after its first income year was May 2017. Thus, the earliest time at which Section 2115 possibly could apply is January 1, 2018, the first day of the next income year after May 2017. This is after Rogers’ removal as a director and the events of the fourth and fourteenth causes of action. Further, under subdivision (e) of Section 2115, a corporation’s quasi-California status for the purposes of the statute terminates when any of the factors used to determine when the corporation conducts a majority of its business in the state no longer applies for an income year. (State Farm, supra, 114 Cal.App.4th at 448.) Critically, Plaintiff alleges in the 4AC that as of September 2016, Innogy- a company based in Germany- was iTy’s “primary customer” and “primary source of funding.” (4AC, ¶ 36.) Because Mr. Rogers successfully used this allegation to overcome FEV’s demurrer to the fourth cause of action, he is judicially estopped from contradicting it and changing his position. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183 [setting forth factors to determine application of doctrine of judicial estoppel].) Thus, he is bound to the position that Section 2115 never applied because a majority of iTy’s sales in 2016 were outside of California.
In sum, the Court concludes that Delaware law applies to Plaintiff’s claims. However, it notes that, as the parties’ acknowledge, California and Delaware law are generally in accord with respect to the claims at issue. Out of an abundance of caution, the Court will include parallel cites for key legal propositions, many of which FEV provides in its brief.
B. Discussion
1. Fourth and Fourteenth Causes of Action: Breach of Fiduciary Duty and Aiding and Abetting Breach of Fiduciary Duty
Both the fourth and fourteenth causes of action allege that FEV, aided and abetted by and acting in concert with the other defendants, breached fiduciary obligations owed to Mr. Rogers through the following acts:
▪ Mr. Cong (acting at the direction of, and with substantial assistance and encouragement from, the other Defendants) negotiating with Rogers to wind up iTy, and then secretly, without Rogers’ knowledge or consent, unilaterally deciding to continue operating iTy, hire additional employees, and seek investors and/or purchasers to the exclusion of Rogers;
▪ Hess, Innogy NV, and Innogy SE creating and exploiting conflicts between the members of the iTy Board of Directors
▪ Causing iTy to enter into a term sheet with an iTy investor secretly, and without Rogers’ knowledge or consent;
▪ Improperly attempting to vote Rogers off of the board of directors resulting in Rogers’ exclusion from essential corporate functions and decisions;
▪ Failing to deliver accurate and timely reports of the business of iTy to Rogers;
▪ Seizing control of the business, assets, and records of iTy in derogation and total disregard for the rights, interest, entitlements, and benefits due to Rogers as a stockholder and board member;
▪ Improperly attempting to procure stockholder votes to prepay the Promissory Notes to specifically prohibit only the Promissory Notes held by Rogers from converting into preferred stock of iTy to be issued in the proposed financing; and,
▪ Refusing to allow Rogers to access the corporate books and records in violation of California Corporations Code sections 1601 and 1602.
(4AC, ¶¶ 129, 206.)
(a) the full amount of monies payable to and illegally withheld from Rogers in the form of benefits, distributions and dividends, together with interest thereon; (b) damages resulting from the illegal taking of Rogers’ rights and interests, entitlements, and benefits as a stockholder and board member of iTy; (c) damages resulting from the dilution and diminution in value of Rogers’ shareholding interests caused by Defendants’ wrongdoing including the illegal decision to repurchase Rogers’ supposedly unvested iTy stock and dilution of Rogers’ holdings through the improper issuance of new shares to parties other than Rogers; (d) damages caused by INNOGY’S restructuring of iTy’s finances through the creation of Plause EU and a series of contracts between iTy and INNOGY that preferenced INNOGY above other shareholders and led to the receipt of improper dividends in the form of prioritized overpayments on self-dealing contracts, and (e) damages sustained in order to mitigate against and reverse the illegal acts committed by [Cong/Defendants].
While the fourth and fourteenth causes of action allege the same breaches, the latter does not allege that FEV owed a fiduciary duty. (4AC, ¶¶ 129, 206.) Rather, Plaintiff alleges that FEV aided and abetted breaches of duty by Mr. Cong.
The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary duty, (2) breach of that duty and (3) damage proximately caused by the breach. (Estate of Eller v. Batron (2011) 31 A.3d 895, 897; accord, Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 832.) In order to establish liability for aiding and abetting a breach of fiduciary duty, a plaintiff must establish the following: the third party’s breach of fiduciary duties owed to plaintiff, the aider and abettor defendant’s knowing participation in the breach of that duty and proximately caused damages. (Malpiede v. Townson (Del. 2001) 780 A.2d 1075, 106; accord, Naswari v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 343.)
With respect to the element of knowledge on the part of the aider and abettor, the plaintiff must demonstrate that the defendant had “actual or constructive knowledge that their conduct was legally improper.” (RBC Cap. Mkts., LLC v. Jervis (Del. 2015) 129 A.3d 816, 862; George v. eBay, Inc. (2021) 71 Cal.App.5th 620, 641 [stating that for the requisite knowledge to be found, it needed to be shown that the defendant “made a conscious decision to participate in tortious activity for the purpose of assisting another in performing a wrongful act.”].) They also must show that this secondary actor provided “substantial assistance” to the primary violator. (Kuhns v. Bruce A. Hiler Delaware QPRT (Del. Ch. 2014) 2014 Del. Ch. LEXIS 47, *74.) In determining whether there was “substantial assistance,” the court considers: “(1) [the] nature of the act encouraged, (2) the amount and kind of assistance given, (3) the defendant’s absence or presence at the time of the tort, (4) the relationship to the tortious actor, (5) the defendant’s state of mind, and (6) the duration of the assistance.” (Kuhns, 2014 Del. Ch. LEXIS at 74; accord, Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 352.)
FEV maintains that it is entitled to summary adjudication of the fourth cause of action (and consequently, the fourteenth) for the following reasons: (1) Plaintiff cannot establish that FEV owed a fiduciary duty to iTy during the time frame of this cause of action; (2) Plaintiff cannot prove any claim on his promissory notes; and (3) Plaintiff cannot prove his other claims pertaining to: his removal from the Board; Mr. Cong’s allegedly continuing to run iTy despite their agreement to wind up the company; the termination of his employment; iTy’s secret entry into a term sheet; FEV allegedly creating or exploiting conflicts on the Board; and iTy’s documents and assets.
a. Existence of Fiduciary Duty
Under Delaware law, a shareholder “owes a fiduciary duty only if it owns a majority interest in or exercises control over the business affairs of the corporation.” (Ivanhoe Partners v. Newmont Mining Corp. (1987) 535 A.2d 1334, 1344.) This level of control has been further described as “domination by a minority shareholder through actual control of corporation conduct.” (Citron v. Fairchild Camera & Instrument Corp. (1989) 569 A.2d 53, 70.) Here, it is undisputed that FEV was not a majority shareholder during the time frame of the fourth causes of action. (SSUF Nos. 1, 2.) Thus, FEV did not owe a fiduciary duty to iTy unless it exercised control over iTy’s business affairs, which is precisely what Mr. Rogers alleges. (See, e.g., 4AC, ¶ 37 [“Effectively- beginning … in September 2016, if not earlier- [E.ON] and [FEV] had total control over iTy’s affairs and decision making process.”].) FEV asserts that based on the evidence in this action, Mr. Rogers’ allegations of its control over iTy are baseless. In order to discuss FEV’s role with iTy as argued by FEV and whether it owed the company a fiduciary duty, it is necessary to provide some background and chronology of events as submitted by the company in support of its motion.
As alleged in the 4AC, by mid-September, iTy was running out of money. (4AC, ¶ 23.) Consequently, it became necessary to pursue additional investment opportunities. Mr. Rogers maintains that Cong “scuttled potential deals and rejected all other offers for iTy that continued to involve Rogers” and that FEV knew this, although the only “scuttled potential deal” Mr. Rogers specifically identifies in his complaint is that in “Fall 2016,” Emergence Capital offered to lead a Series A round, but Cong rejected its terms. (Id., ¶¶ 124, 212.) FEV, however, submits evidence (including the declaration of Emergence Capital’s General Partner, Jason Green, as well as his deposition testimony) which demonstrates that Emergence never made such an offer and in March 2016, invested instead in BetterWorks, iTy’s competitor. (SSUF No. 102.) Subsequent to this, Mr. Cong attempted to connect with various persons and entities suggests by Plaintiff, to no avail. (SSUF No. 12.) Though Plaintiff alleges that iTy appeared to be “surging toward a successful Series A financing round” after a September 2, 2016 convention at which Mr. Cong introduced iTy’s software Plause (see 4AC, ¶¶ 26-27), he himself admitted that raising such financing was not likely. After Plaintiff provided certain financial information late September 2016 to a contact at Khosla Ventures, who had previously invested in iTy but indicated that no further investment would be forthcoming, the contact, Keith Rabois, responded to Plaintiff on October 2, stating, “Yes, it would be VERY difficult to raise a series A with these metrics.” (See Deposition of Jose Cong (“Cong Depo.”), Volume 1 (“Cong V1”), Exhibits 16 and 58, attached as Exhibits B (Depo.) and D (Exhibits to Depo.) to Declaration of Rajiv Dharnidharka (“Dharnidharka Decl.”).) To which Plaintiff replied, “Indeed, we saw that with no sales, no distribution, as David predicted.” (Id. & Cong V1 193:23-194:7.)
FEV submits evidence which show that by this point in the timeline of the events of this action, i.e., late September, Rogers expressed a desire to leave iTy, including in emails to Mr. Cong, and stated that he was out of money and would not invest any further in the company. (Cong V1, Exhibit 59 at ROGERS_001575; SSUF No. 44.) While Rogers alleges that, “by no later than October 11, 2016,” he and Mr. Cong consequently “agreed to dissolve iTy, and wind up the company” (4AC, ¶ 38), FEV’s evidence demonstrates that there was no such agreement. In a September 29 email to Mr. Cong, Rogers stated, “I believe we can pull off an acquisition, but I’m not expecting that. I am rooting for you to negotiate options,” which Mr. Cong interpreted as Plaintiff being supportive of his efforts to keep iTy afloat, including by seeking funding. (Cong V1 at 195:8-17, 198:8-199:6, 200:25-201:24, Ex. 59.) On October 2, Keith Rabois introduced Mr. Rogers by email to the CEO of a competitor and wrote, “I mentioned that you guys might be considering acquisition offers.” (Id.) Plaintiff forwarded the email to Mr. Cong, adding: “Btw, I hate the idea of this so much.” (Id., 204:8-205:12, Ex. 60.)
Subsequent to the foregoing, iTy employee Marin Licina emailed other employees to report what he had “heard in the last few days,” which was that Plaintiff “want[ed] to stop ASAP” because the company was “out of money” and it “[did not] make any sense to continue,” while Mr. Cong “want[ed] to keep looking for funding” as he believed it was “still possible” and did not “want to let the team and existing investors down.” (Cong V1 208:1-211:1, Ex. 61.) Mr. Licina also reported that Mr. Rogers confirmed to friends who were angel investors in Plause that he did not want to continue working on it and did not want to continue working at the company, while Mr. Cong was continuing to reach out to “pretty much everyone who might want to invest anything between 400k and 1 million.” (SSUF No. 45.) Plaintiff then sent an email to Mr. Cong on October 7 with the subject “Found -> Advisor” stating that he was “taking a step back from my responsibilities with the company,” and thus ceased to be an employee on that day. (Cong V2 495:11-496:6, 497: 5-14, Exs. 103, 104.) iTy chief of staff Patrick Fennie informed iTy’s benefits provider of the same. (Id.) In the email, Plaintiff also indicated that he understood that Mr. Cong continuing to operate iTy was a possibility. (Id., Ex. 104 [“In the event that you do want to continue Plause on your own …”].)
That same day, Plaintiff also sent an email to his brother stating, “Jose wants to go solo with Plause- proposing an agreement with him- what do you think?” (Dharnidharka Decl., Exhibit E [ROGERS 010881-82].) Mr. Rogers then e-mailed a proposal to Mr. Cong in which he indicated he was “happy” to support Mr. Cong “solo-driving Plause and taking company decisions solo, provided we agree on the entire set of terms included here ….” (Cong V2, Exs. 62, 105.) The terms included, “Vacate seat of board of directors,” “Two completed years of vesting,” “At company’s 1st milestone of raising at lease 500k- pay back half of Seth’s convertible note,” and “At company’s 2nd milestone of raising at least 1M- pay back remainder of Seth’s convertible note investment.” (Id.) Subsequent to this, Mr. Rogers claims he emailed iTy’s counsel, Wilson Sonsini, to start documentation of an agreement to dissolve and wind up the company. However, this email says nothing about dissolution or winding up; instead, Plaintiff stated he had “lost confidence in [Mr. Cong] as a CEO and partner” and did not believe he could “adequately support him as an active partner.” (SSUF Nos. 49, 50.) He continued that if Mr. Cong chose to proceed with self-funding iTy, an option Plaintiff “believe[d] he [was] entertaining,” he was inclined to agree to that path if the parties agreed on certain provisions, including iTy repurchasing Plaintiff’s notes upon raising $500,000 and $1,000,000. (Cong Depo., Ex. 106.) Plaintiff was still a Board member at this time.
It is during this period of time that FEV enters the picture. According to Mr. Rogers, in August 2016, he and Mr. Cong visited the offices of an entity named Intertrust where an executive and others he believed were representatives of Innogy, including Roland Hess, summoned Mr. Cong into a conference room. (4AC, ¶ 31.) Mr. Cong told Plaintiff to wait in the kitchen, an exclusion he alleges was condoned by the other meeting attendants. (Ibid.) Plaintiff asserts that given these events, Mr. Cong and Innogy had clearly already made a decision to move forward without him. (Id., ¶¶ 28, 30, 38.)
FEV counters with evidence that completely belies Plaintiff’s allegations. Per this evidence, none of the individuals in the meeting were from FEV or Innogy SE (now known as E.ON Verwaltungs GmbH (“E.ON”)), but rather were from Intertrust, a company Mr. Cong knew from his prior employment. (SSUF No. 18.) In an email sent to Mr. Cong thanking him for the meeting, Talal Shamoon of Intertrust introduced Mr. Cong to Mr. Hess and Florian Kolb, who were identified as being from RWE NV LL (“RWE”), now known as FEV; this was Mr. Cong’s first introduction to Innogy, RWE, FEV, Mr. Hess and Mr. Kolb. (SSUF No. 19.) Mr. Cong suggested an investment by FEV in iTy on October 6 for the first time when he emailed Mr. Kolb. (SSUF No. 21.) Mr. Kolb suggested a meeting, but no mention or offer of an investment was made. (SSUF No. 22.) In an email dated November 6, Mr. Cong informed iTy employees of the upcoming meeting and desire to partner with RWE. (Cong V1, Ex. 67.) Mr. Cong testified that iTy was in an arms-length negotiation with FEV (and E.ON), with neither having made an investment offer by this time. (SSUF No. 23.) According to Mr. Cong, neither FEV nor E.ON controlled his actions and he had not ceded decision-making power over to iTy. (SSUF No. 3.) He testified that he wrote the November 6 email to iTy employees to prepare them not to disclose secret information about the company at the upcoming meeting when no written agreement with FEV (or E.ON) existed at that time. (SSUF No. 24.)
Per FEV’s evidence, until FEV invested in iTy on March 20, 2017, there was no agreement or contract between iTy and FEV (or E.ON) other than a standard nondisclosure agreement and small pilot program in Europe that was reported to iTy’s stockholders at the end of that month. (SSUF No. 5.) There were also no relationships between FEV (or E.ON) and iTy Board members, nor did Mr. Cong have any agreement personally with FEV (or E.ON) to deal exclusively with them with respect to iTy. Mr. Cong unsuccessfully sought financing from other sources throughout the negotiations with FEV that ultimately led to its investment with the signing of the SPA, but no one else was prevented from investing in the company. (SSUF Nos. 6, 7.) Additionally, Mr. Cong tried to find a company to acquire iTy. (SSUF No. 8.)
FEV also submits evidence that iTy’s legal decisions and strategy were made by Mr. Cong and the company’s counsel, Wilson Sonsini, not FEV or its counsel DLA Piper. (SSUF No. 10.) By November 23, 2016, iTy had enlisted Wilson Sonsini to start work on its behalf by sending DLA Piper a document needed to assess a potential deal for FEV. (Id.) Mr. Cong testified that no entity was making decisions for him or had taken control of iTy by this time (SSUF No. 3), and that he did not try to hide or conceal anything from Plaintiff, either by himself or with FEV or E.ON (Cong V1 at 302:8-13.) Mr. Cong testified that Plaintiff was not included in any September 2016 meetings because he was readying Pause for launch, and he was not invited to the November 7 meeting because he had left iTy as an employee by October 7. (SSUF No. 20; Cong V1 at 250:18-251:20.)
On December 19, Plaintiff asked Mr. Rogers what the terms of the pending round with RWE were. (Cong V2 503:15-504:19, Ex. 107.) The following day, when Plaintiff informed Mr. Cong that he wanted to remain on the Board. Mr. Cong responded that this would be viewed unfavorably by any hypothetical investor and Plaintiff asked for the pending deal sheet. The following day, Mr. Cong sent two unsigned draft term sheets to Plaintiff. (Cong V1 at 266:17-277:16; Deposition of Jose Cong, Volume 2 (“Cong V2”) at 502:17-506:18, Exs. 69-72, 107-108, attached as Ex. C to Dharnidharka Decl.) One pertained to a Series Seed Preferred Stock round up and investment by FEV of $2 million to acquire at least 15% of iTy including conversion of all debt, with another $1 million coming from other investors, and FEV would have the right to designate one director position of a post-round Board. (SSUF No. 25.) The other term sheet was for a different investment that was not pursued. (Cong Depo., Ex. 71.)
In his email, Mr. Cong suggested that Plaintiff resign from the Board, or figure out a way for Mr. Cong to buy promissory notes held by him for funds he previously lent to iTy and iTy to buy back some of his stock. (Cong Depo., Ex. 69.) Mr. Cong believed that having a departed co-founder remain on the Board would send the wrong signal to investors and reiterated his hope to Plaintiff that they could figure out a way to keep iTy alive. (SSUF No. 36.) Plaintiff responded with terms he would consider to move to an agreement, including Mr. Cong and iTy buying him out of the company and him resigning from management and the Board. (Cong Depo., Ex. 69.) Subsequent to this, Wilson Sonsini was advised via email that Plaintiff was represented by counsel and all future communications were to be made to them. (SSUF No. 51.) No mention of dissolving or winding up iTy was made in this email.
On December 22, 2016, Mr. Cong emailed Plaintiff that iTy needed him off the Board in order to proceed with funding efforts. (Dharnidharka Decl., Ex. I.) Plaintiff’s counsel asked Wilson Sonsini where the desire to have his client removed from the Board was coming from. (Declaration of S. Toni Wormald in Support of Motion for Summary Judgment/Adjudication, Ex. 1.)
Slides for a January 26 Board meeting stated that “Innogy LLC” was interested in investing with “Final signing and closing pending Seth Rogers’ departure from Board of Directors per Innogy LLC request.” (Cong Depo., Ex. 109.) Plaintiff and his counsel attended a Board meeting the following day, and subsequent to that, his counsel emailed Wilson Sonsini and disagreed that FEV had demanded his client’s removal from the Board. (Dharnidharka Decl., Ex. J [stating the expectation that Plaintiff resign from the Board “is not …the clear condition precedent to closing requirement from Innogy as represented by [Mr. Cong and iTy’s counsel].” Regarding the meeting, Mr. Cong explained it was his understanding that Innogy had requested that the Board composition issues be resolved before it completed its investment, but there was no demand on its part for Plaintiff’s removal. (SSUF No. 40.) FEV’s counsel had sent an email expressing an expectation, not a demand, that the Board structure be resolved. (Dharnidharka Decl., Ex. K.)
Plaintiff’s counsel then communicated that his client would consider settlement if, among other things, iTy pay him for his promissory notes in an amount equal to all principal and accrued and unpaid interest as of closing, plus a liquidation preference exclusive to him. (Dharnidharka Decl., Ex. J.) Counsel indicated that if the suggested terms were not acceptable, his client would seek “substantial additional monetary compensation by way of compromise.” (Id.) No mention of dissolving or winding up iTy was made. (SSUF No. 52.)
On February 1, Wilson Sonsini sent Plaintiff’s counsel a signed notice of written consent of the majority of iTy’s common shares removing Rogers as a director effective the day prior. (Dharnidharka Decl., Ex. L; SSUF No. 41.) Mr. Cong testified that this was at his, not FEV’s, doing, as he understood that FEV saw a potential contentious relationship with Plaintiff after he failed to resign from the Board and wanted clarity on the situation, and he proffered consents for the shareholders to make up their own minds on the matter. (Cong V2 543:21-544:8, 545:1-8.)
Shortly thereafter, Plaintiff expressed on multiple occasions, via his counsel, his support of FEV’s investment in iTy, and that if his resignation from the Board was a necessary term of its agreement to invest, he was willing to do so upon funding being determined and entering into a settlement agreement with Mr. Cong. (Declaration of Patrick Elftmann in Support of Motion for Summary Judgment/Adjudication, Ex. 1; Dharnidharka Decl., Ex. O; Declaration of Craig Tighe, Exhibit M.)
FEV acquired its interest in iTy with the execution of the final SPA on March 20, 2017- a document which was negotiated over time and not presented as take-it-or-leave it by FEV. (SSUF Nos. 1, 4; Cong V1 279:11-280:6, 282:5-283:22.) However, the transaction was affected by Khosla Ventures’ (“KV”) demands about promissory notes: at KV’s insistence, all promissory notes- including Plaintiff’s- were converted on the same terms, those being conversion to Preferred Stock by the same calculation applying the same factors. (SSUF Nos. 31, 32.) KV reviewed and confirmed the accuracy of the final capitalization model to insure that its notes properly converted to the appropriate number of Preferred Stock and its interest in iTy would not be improperly diluted. (SSUF No. 31.)
In addition to the SPA, FEV, KV, iTy, Mr. Cong, and other prior investors and common stock holders executed a Voting Agreement pursuant to which they agreed to vote their shares to elect and maintain in office three Board members: one Series A Director as chosen by FEV, initially Mr. Hess; and two Common Directors as chosen solely by a majority of common stockholders, with one seat initially filled by Mr. Cong and the other vacant. (SSUF No. 131.) Plaintiff owned 708,333 shares of common stock, while FEV did not own any. (SSUF No. 59.) Consequently, per the Voting Agreement, FEV had no say in the selection of a majority of the Board and was a minority on it.
Based on the foregoing, FEV has demonstrated the following: Cong made all decisions and all actions for iTy- supported by his colleagues and counsel, Wilson Sonsini- that Mr. Rogers complains of in this time frame on his own; FEV did not have a “tight and secretive relationship with Mr. Cong” beginning in the summer of 2016, with FEV and E.ON only being introduced to him for the first time after the Intertrust meeting; iTy employees attended subsequent meetings between FEV and Mr. Cong, belying Plaintiff’s allegation that these meetings were secretive; Mr. Cong sent the first draft investment documents (unsigned term sheets) pertaining to FEV’s proposed investment, which were drafted by iTy’s counsel, Wilson Sonsini, to Plaintiff; Mr. Rogers left his employ with iTy on October 7, 2016 and was aware at that time that Mr. Cong was seeking funding to continue running the company; while engaging in arms-length negotiations with FEV, Mr. Cong continued to seek investment from other sources, to no avail, a result that FEV had no influence on; once Plaintiff became aware of Mr. Cong’s desire to continue running iTy, he demanded various benefits if Mr. Cong succeeded; iTy’s legal decisions were made by Mr. Cong and its counsel, Wilson Sonsini, not FEV or its counsel (DLA Piper); Mr. Cong acted of his own volition with regards to Plaintiff’s removal from the Board, with Plaintiff himself affirming his understanding that any expressed desire to have him removed was not a requirement by FEV for it to reach an agreement to invest in iTy; and there was no agreement between FEV and either iTy and Mr. Cong until the parties executed the SPA on March 20, 2017.
All told, FEV’s evidence establishes that it did not owe a fiduciary duty to iTy and its shareholders during the timeframe of the events of the fourth cause of action. Per FEV’s showing, it did not even become a shareholder of iTy until the SPA was executed in March 2017 such that it could be held to owe a fiduciary duty to the company and its shareholders prior to that point in time. This is true even if FEV exercised control over iTy’s business affairs as a prospective investor, but FEV’s evidence demonstrates that it did not exercise such control. Consequently, the burden shifts to Plaintiff to establish the existence of a triable issue of material fact in this regard.
To reiterate, as Mr. Rogers acknowledges that FEV was not a majority shareholder during the events of the fourth cause of action, he can only raise a triable issue of material fact with regard to whether FEV owed iTy a fiduciary duty prior to the execution of the SPA if he establishes that FEV exercised control over the company’s affairs as he alleges.
To this end, Mr. Rogers first disputes FEV’s assertion that it did not have a “tight and secretive relationship” with Mr. Cong as of the summer of 2016 by addressing the August 2016 meeting with Intertrust that he maintains he was deliberately excluded from by Mr. Cong and Innogy or its representatives. Plaintiff maintains that Florian Kolb, a Intertrust board member and CEO of FEV, was an attendee, but the evidence he cites for this proposition (see Plaintiff’s Separate Statement in Opposition to FEV’s Motion for Summary Judgment/Adjudication (“RSUMF”) No. 18) does not stand for as much, and he offers nothing which disputes Mr. Cong’s testimony that Mr. Kolb did not attend this meeting. Further, while Mr. Rogers submits an email from Talal Shamoon of Intertrust that was sent to Mr. Cong and Mr. Kolb the day after the meeting as evidence of the latter’s involvement, he does not explain why Mr. Shamoon would be introducing Mr. Cong to Mr. Kolb as he did in the email if both had attended the meeting. (See Declaration of Todd Norris in Support of Plaintiff’s Opposition to Motion for Summary Judgment (“Norris Decl.”), Ex. 21 (Talal Shamoon Depo.), Ex. 227 to Talal Shamoon Depo. [“Jose, Great to see you yesterday. I’d like to introduce you to Roland Hess and Florian Kolb ….].)
Plaintiff next attempts to show that subsequent to the aforementioned meeting, Mr. Cong used his position with iTy to “systematically isolate [the company] form other potential investors, such that Innogy would appear to be a ‘savior’ when it made its offer to fund the company.” (RSUMF No. 4.) Mr. Rogers maintains that financial projections prepared by iTy employee Michael Stark were never presented to any potential investor except Innogy, but the evidence he cites in support, a segment of the deposition testimony of Jonathan Triest of Ludlow Ventures, does not provide as much. (See RSUMF Nos. 6, 7.) Moreover, representatives from Emergence Capital and Ludlow testified against Plaintiff’s assertions. (SSUF No. 102.) Plaintiff also asserts that at least one other unknown investor committed to co-lead an investment round for $3-6 million with a new fund, with a term sheet issued for the same, but Mr. Cong prevented this deal in favor of his in-the-works, secret deal with FEV. He continues that because no evidence was produced that Mr. Cong followed up on this deal, the indication is that FEV and Mr. Cong already had their agreement that it was FEV who would lead the next investment round. While Plaintiff has produced an email dated May 17, 2016 (notably prior to the summer of 2016 when the allegedly tight, secretive relationship between Mr. Cong and FEV is to have existed) wherein Mr. Cong stated he had a commitment and term sheet “coming” for the investor to co-lead with a $3-6 million investment, his assertion that because no one has produced evidence that Mr. Cong followed up on the deal (an assertion not supported by citation to any actual evidence) it means that he and FEV had already reached an agreement is entirely speculative. There is simply nothing before the Court which addresses why this apparent deal did not go forward, including if it was for nefarious reasons, or as a result of any actions by FEV. Though Plaintiff insists in his own declaration that other investors were interested in iTy, he does not name any that have not subsequently refuted his claim.
Next, Plaintiff addresses his contention that Innogy used its relationship with Mr. Cong to control the iTy Board and effectuate his removal from it. He asserts that Marin Licina stated that Mr. Cong pressured him into voting for his removal from the Board without providing the information he requested from the Innogy deal, and Michael Stark, another Board member,[14] was not informed until the day of the vote that he had to vote for Plaintiff’s removal. (RSUMF Nos. 3-5, 9, 108, 135.) While it is true that Marin Licina, who was not a Board member, stated in an email January 29, 2017 that he felt “pressured to sign” a letter by Mr. Cong calling for Plaintiff’s removal from the Board, he also stated he was “convinced” there was no longer any need for Mr. Rogers to be on the Board given that he was no longer actively involved in iTy. (Norris Decl., Ex. 2.) Moreover, FEV submits evidence that Mr. Licina ultimately did not sign a consent for Plaintiff’s removal. (See Dharnidharka Decl., Ex. 75.) Plaintiff proffers no evidence that FEV had any involvement in this “pressure” or evidence to refute the showing made by FEV, above, that Plaintiff did not understand any “expectation” that he resign from Board to be a requirement from Innogy to its reaching an agreement with iTy to invest in the company. (Id., Exs. J and K.) The email from FEV’s counsel that Plaintiff cites as demanding his removal as a condition of investment did not actually do so; FEV simply stated that it wanted clarification as to the Board’s composition. (Id.) In short, while Mr. Rogers maintains that FEV “orchestrated” his removal from the Board, he simply offers no evidence which establishes as much.
Plaintiff also fails to establish that FEV controlled iTy’s legal strategy. (RSUMF No. 10.) Plaintiff relies heavily on the fact that FEV asserts a common interest privilege from production of communications with iTy starting in mid-November 2016, but this alone does not demonstrate that FEV was in anything other than an arms-length relationship with iTy, much less that FEV was controlling iTy’s legal strategy. It is pure speculation to assert that because such a privilege has been asserted by FEV, it controlled iTy’s legal decisions. Plaintiff otherwise offers no evidence that indicates the FEV exerted any control over iTy’s legal strategy.
Plaintiff additionally attempts to show that FEV controlled iTy’s affairs during the relevant time period by pointing to the fact that Innogy built its NWoW platform on top of Plause’s IP, and had already run a pilot program for one of its NWoW teams in Europe, with another pilot planned, in 2016. (RSUMF No. 3.) It is not clear to the Court how, assuming it to be true, this fact evidences the control necessary to establish a fiduciary duty on the part of FEV, and any event, the evidence Plaintiff cites does not actually establish what Plaintiff maintains it does. Further, Mr. Kolb testified that Plause was not material NWoW and did not accelerate its development. (Supplemental Declaration of Rajiv Dharnidharka (“Supp. RD Decl.”), Kolb Deposition at 24-27, 77.)
Plaintiff concludes his discussion on the issue of whether FEV owed iTy a fiduciary duty in the relevant time period by asserting that evaluation of the weight of the evidence he has submitted is a “highly specific fact inquiry” not appropriate for resolution on summary judgment. (See Opp. at 29:7-9, citing Voight v. Metcalf (Del. Ch. 2020) 2020 LEXIS 55.) But the case cited for this proposition, which discussed, in part, the analysis utilized to determine whether a shareholder is a controlling one, did not involve a motion for summary judgment, but rather a motion to dismiss based on what was alleged in the pleadings. In any event, the mere fact that analyzing shareholder control involves a highly fact-specific inquiry does not mean it cannot be decided on summary judgment where no triable issue of material fact is found to exist.
Here, the Court concludes that Plaintiff has failed to raise a triable issue with regard to whether FEV exerted control over iTy’s affairs in the timeframe of the fourth cause of action and thus owed iTy a fiduciary duty. Consequently, FEV is entitled to summary adjudication of the fourth cause of action. Despite this conclusion, the Court will address the separate breaches of fiduciary duty purportedly committed by Mr. Cong alleged in the fourth cause of action given Mr. Rogers’ allegation in the fourteenth cause of action that FEV aided and abetted those breaches.
b. Promissory Notes
Plaintiff alleges that FEV (in the fourth cause of action) or Mr. Cong (in the fourteenth cause of action) breached a fiduciary duty by “[i]mproperly attempting to procure stockholder votes to prepay the Promissory Notes to specifically prohibit only the Promissory Notes held by Rogers from converting into preferred stock of iTy to be issued in the proposed financing.” (4AC, ¶¶ 129(g), 206(g).)
As FEV notes, the Court permitted this claim at the pleading stage, concluding that by alleging that the defendants engaged in conduct that singled out Mr. Rogers and de-valued his holdings in iTy, Plaintiff adequately pleaded a direct as opposed to derivative claim under Delaware law. (See Court’s Oct. 2022 Order at 18, citing 4AC ¶ 22.) It also concluded that any claim that the holdings of all minority shareholders were devalued was derivative in nature and therefore could not be maintained by Plaintiff in this action. With regard to Plaintiff’s Promissory Notes specifically, FEV submits evidence which establishes that they were converted to Series A Preferred shares, not repurchased, on the same terms as everyone else’s notes as part of the March 2017 financing. (SSUF Nos. 31, 32.) As explained above, FEV’s evidence shows that while the terms of the SPA were being negotiated, KV requested that its convertible notes, and all other notes, convert to Series A Preferred stock, not series seed as had been contemplated in the draft term sheet and first draft SPA. (SSUF Nos. 28, 30, 62.) Thus, iTy did not repay Plaintiff’s notes or single him out for disparate treatment relative to other note holders, and FEV was not behind the conversion that occurred.
In his opposition, Plaintiff counters that the defendants “prevented [him] from converting his promissory notes into preferred stock” and claims “damages related to FEV’s improper pre-payment of his promissory notes.” (Opp. at 36:15-20; Declaration of Seth Rogers in Support of Opposition to Motion for Summary Judgment/Adjudication (“Rogers Decl.”), ¶ 35.) But he does not provide any evidence that actually disputes FEV’s showing that his notes were converted- not prepaid- on the same terms as all other notes and thus that he was not singled out. Plaintiff’s having been treated differently than others is the only way he can succeed on this direct claim, and he fails to demonstrate the existence of a triable issue of material fact in this regard. Consequently, Plaintiff cannot succeed on a claim for breach predicated on the conduct directed towards his promissory notes.
c. Mr. Rogers’ Removal From the Board
Plaintiff alleges breach by the defendants “attempting to vote [him] off of the board of directors resulting in [his] exclusion from essential corporate functions and decisions.” (4AC, ¶¶ 129(d), 206(d).) This claim is a nonstarter, as indicated in several of the Court’s prior orders, as there is no authority which provides that a director’s removal from the board, without more, is a breach of fiduciary duty. Plaintiff still cannot establish that FEV or Mr. Cong had an obligation, as fiduciaries, to keep him on the Board, and Delaware law is clear that, barring exceptions not applicable here, a director (or the entire board) “may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.” (8 Del. C., § 141(k).) Thus, Plaintiff cannot succeed on this claim.
d. The Alleged Agreement to Wind Up iTy
Mr. Rogers alleges that by no later than October 11, 2016, he and Mr. Cong agreed to dissolve and wind up the company. FEV, however, proffers evidence which sharply undercuts this allegation, though even if it did not, the Court agrees with FEV that Plaintiff could not pursue this claim anyway because any harm caused in continuing to run iTy and trying to obtain funding would be experienced by iTy and all of its stockholders, not Plaintiff personally, and thus it is derivative in nature.
Even if Plaintiff could pursue this claim, it has no merit. Turning to FEV’s evidentiary showing, the only cited support for an agreement to wind up is Plaintiff’s October 11 email to iTy’s counsel, which says nothing about dissolution or winding up nor directs counsel to begin any related process. (SSUF No. 50.) What it does do however, is affirm Plaintiff’s knowledge of that fact that Mr. Cong planned to continue iTy. This knowledge is reflected in additional emails cited by FEV. (SSUF Nos. 45-47.) This is entirely contrary to the existence of an agreement to wind up iTy.
Despite this showing, Plaintiff insists in his opposition that: he and Mr. Cong agreed to wind up iTy if it did not achieve Series A funding by the first week of October 2016; and Plaintiff told employees that the company was shutting down, and he therefore “understood” by October 11 that Mr. Cong had agreed to the business up. (Opp. at 31:8-17.) But the evidence produced by FEV shows that Plaintiff could not have had such an understanding; this includes Mr. Cong informing Plaintiff in a September 28-29 Slack chat that iTy might be “kept afloat solely with his continued investments” (Rogers Dec., ¶ 16), Plaintiff’s October 7 email to Mr. Cong beginning, “In the event that you do want to continue Plause on your own” (Dharnidharka Decl., Ex. 104), and emails between Plaintiff and Licina where the latter told Plaintiff he was still working at iTy as of October 10 and November 2 (id., Ex. E.) Even if none of the foregoing evidence existed, Plaintiff also admits that he did not tell FEV of any wind-up agreement. Consequently, in the absence of any evidence to the contrary, no claim based on the wind-up agreement allegations can be maintained against FEV.
e. Rogers’ Termination
While the title of the fourth cause of action includes “Improper Termination and Removal of Rogers as an Employee,” no such claim is pleaded therein. (See 4AC at 27:20, ¶¶ 129, 206.) In any event, FEV persuasively argues that Plaintiff cannot prove a breach of fiduciary claim based on his termination because he did not have a right to continued employment at iTy and no one, neither Mr. Cong nor FEV, had any fiduciary duty to continue his employment. Moreover, Mr. Rogers’ Stock Purchase Agreement provided that nothing therein affected iTy’s ability to terminate his employment, and that upon termination of Plaintiff’s “Continuous Service Status,” defined as “the absence of any interruption or termination of service of an Employee or Consultant,” iTy was permitted to repurchase his Unvested Shares. (SSUF No. 57.) FEV’s evidence establishes that he walked out of iTy by October 7, 2016, interrupting his Employee status, including an email dated February 3, 2017, wherein Mr. Rogers admitting, “I have recently stepped back from my full-time involvement with iTy …” (Elftmann Decl., Ex. 1; SSUF No. 58.) While Plaintiff claimed in the same email that he remained a “director, officer and major shareholder of iTy,” none of these roles are an employee. Plaintiff characterizes the end of his employment as involuntary, but he does not dispute that he walked out iTy’s door on October 7 and told Mr. Cong that he was “taking a step back from my responsibilities with the company ….” (Dharnidharka Decl. Ex. 104.) In sum, the Court concludes that Plaintiff cannot succeed on this claim because (1) he did not have a right to continued employment, and (2) even if he did, he left his employment at iTy of his own volition by October 7, 2016.
f. iTy’s Alleged Secret Entry into A Term Sheet with FEV
Plaintiff alleges that the defendants breached their fiduciary duty by “[c]ausing iTy to enter into a term sheet with an iTy investor secretly, and without [his] knowledge or consent.” (4AC, ¶¶ 129(c), 206(c).) FEV insists that Plaintiff cannot succeed on this claim because Mr. Cong sent him unsigned term sheets before any agreement was entered into. (SSUF Nos. 60-62.) It persuasively continues that Plaintiff cannot recover for any damages caused by a bad term sheet because they would be experienced by iTy and its stockholders as a whole, rather than by him personally, and thus would be a derivative claim he cannot maintain here.
In his opposition, Plaintiff does not dispute FEV’s showing that he received unsigned term sheets from Mr. Cong prior to the execution of the SPA between itself and iTy. (RSUMF No. 25.) Instead, he complains that he did not know about the sheets earlier, could not affect their terms, and was kept in the dark after receiving them. (Opp. at 32:23-28.) But this is not what he alleges in the 4AC; his pleaded grievance is that iTy secretly entered into a term sheet without his consent. Mr. Rogers cannot defeat FEV’s showing defeating this allegation by attempting to recast his claim in his opposition. Based on FEV’s showing, the Court concludes that Plaintiff cannot succeed on a claim for breach of fiduciary duty predicated on iTy’s entry into the term sheet with FEV.
g. Creation or Exploitation of Conflicts on the Board
With this claim, Plaintiff alleges that the defendants breached their fiduciary duty to iTy by “Hess, Innogy NV [FEV], and Innogy SE [E.ON] creating and exploiting conflicts between the members of the iTy Board of Directors.” (4AC, ¶¶ 129(b), 206(b).) Thus, this claim is not predicated on Mr. Cong’s actions, as the others are. FEV persuasively argues that it could not have breached any fiduciary duty by creating a conflict between Plaintiff and Mr. Cong because they had already reached different opinions about their roles in iTy, with Plaintiff electing to step back and Mr. Cong choosing to continue, before the parties started to talk about investment. (SSUF Nos. 63-66.) Its evidence further shows that by the time FEV invested in iTy, Plaintiff was off the Board and there was no conflict to exploit. (SSUF Nos. 67, 68.) FEV has also proffered evidence that Mr. Cong instructed shareholders to “vote their conscious” rather than urge a particular result. (Cong V2 at 541:17-542:11, Ex. 118.) Moreover, as FEV maintains, even if Plaintiff could prove that FEV created or exploited a board conflict (or aided and abetted the same), he could not pursue any claim because liability on this basis requires utilizing the board conflict to enter a transaction that harms the corporation. (See, e.g., Malpiede v. Townson (2000) 780 A.2d 1075, 1097.) Harm to the corporation is a derivative claim that Plaintiff cannot maintain on his own.
In his opposition, Plaintiff refers to the defendants as having violated the fiduciary duty of candor, but this is not alleged in the 4AC and thus it cannot create a triable issue on this claim. He reiterates the disproven claim that Innogy required his removal from the Board and asserts that Mr. Cong controlled the presentation of information during this process. But even if Mr. Cong did exert such control, there is no evidence that he was aided or abetted by FEV in this regard. Plaintiff otherwise fails to proffer evidence which demonstrates that FEV created or exploited conflicts between members of the Board. Thus, FEV has established that Plaintiff cannot succeed on this claim.
h. Access to iTy’s Documents and Assets
The remaining claims in the fourth and fourteenth causes of action involve access or control of iTy’s documents or assets. It is undisputed that iTy, not Plaintiff (or FEV), owns all intellectual property at issue. (RSUMF No. 71.) Thus, there does not appear to be any basis to the allegation that the defendants seized the company’s assets. (4AC, ¶ 129(f).) As for any the contention that Rogers was denied access to iTy’s corporate records and books in violation of Corporations Code sections 1601 and 1602, as FEV correctly notes, the inspection obligations at issue are statutory in nature and not fiduciary, and thus cannot serve as predicates for these causes of action. (See also 8 Del. C. § 220.) Further, there are no allegations that a demand for inspection was made on FEV, in particular. Thus, the Court agrees with FEV that Plaintiff cannot establish this claim.
i. Conclusion
FEV has not only demonstrated that it did not owe iTy a fiduciary duty during the timeframe of the fourth cause of action, but also that Plaintiff cannot succeed on any claim for aiding and abetting the breaches on which that claim is based, i.e., the fourteenth cause of action, because there was no breach by Mr. Cong, and even if there was, FEV did not knowingly participate in any such breach or provide substantial assistance to Mr. Cong. Accordingly, the Court concludes that FEV is entitled to summary adjudication of the fourth and fourteenth causes of action in its favor.
2. Tenth Cause of Action: Breach of Fiduciary Duty
The tenth cause of action is based on FEV’s alleged actions after September 21, 2017, when FEV purchased additional Preferred Stock and with Mr. Cong allegedly owned a majority of the shares of that class of stock. (4AC, ¶ 38.) FEV maintains that is it is entitled to summary adjudication of this cause of action and any of the five damage claims asserted therein for the following reasons: (1) three damages theories are duplicates of the fourth and fourteenth causes of action from the earlier timeframe that have been refuted above; (3) FEV did not owe a fiduciary duty; (3) one of the damage claims is derivative in nature and there Plaintiff cannot pursue it; and (4) the remaining personal claim by Mr. Rogers for legal fees was abandoned by him and fails as a matter of law. FEV additionally insists that Plaintiff cannot establish that it owed iTy a fiduciary duty during this timeframe because he wrongly conflates ownership of Preferred Stock with control of the company, which FEV actually passed up on.
a. Three Claims Predating the Relevant Timeframe
Both the fourth and tenth causes of action include claims based on Plaintiff’s Promissory Notes, his termination, and his removal from the Board, all events which preceded the time at which FEV purportedly became a majority shareholder. The Court has already determined that Plaintiff cannot succeed on these claims because FEV did not owe iTy a fiduciary duty during that time and none of these events were breaches even if a duty was owed.
b. Fiduciary Duty
Plaintiff’s insistence that FEV owed iTy a fiduciary duty after the SPA was executed is based on his contention that the company was a majority shareholder by owning a majority of Preferred Stock. (4AC, ¶ 173.) Notably, there is no allegation that FEV owed any shares of common stock, and it is an undisputed fact that it did not. (RSUMF No. 132). This is critical because under the Voting Agreement, iTy’s common stockholders controlled two of the three Board seats. (SSUF Nos. 130-131.) As FEV maintains, by entering into this agreement, FEV locked itself into a minority position on the Board, where a majority of directors is required to make a board decision. Thus, FEV lacked the ability not only to control iTy, but also to remove Mr. Cong, who filled one of the two common director slots, from it, and establishes that it did not owe a fiduciary duty based on majority stock ownership.
In his opposition, Plaintiff, who does not address the Voting Agreement issue, insists that FEV controlled iTy before it became a purported majority stockholder (i.e., during the events of the fourth cause of action), but the Court has already rejected this contention for the reasons articulated above. Thus, Plaintiff fails to raise a triable issue with regard to whether FEV owed a fiduciary duty iTy, both before and after the SPA was executed. In the absence of such a duty, Plaintiff cannot succeed on this claim.
c. Claim that FEV Misappropriated iTy’s IP and Caused the Company to Enter Into Bad Contracts
Even if Plaintiff could establish that FEV owed iTy a fiduciary duty during the relevant time period, the Court agrees with FEV that he cannot maintain a claim for breach based on his allegations that FEV caused the company to enter into contracts or other transactions that were bad for iTy but benefited FEV and E.ON. (4AC, ¶ 179(d).) Because iTy was the counterparty to the contract and transactions to which Plaintiff objects (4AC, ¶¶ 98-99, 177, 183), any damages or recovery (based on a rescission or restructuring) would go to iTy and its shareholders, not to him. Thus, the claim is derivative in nature, and cannot be asserted by Plaintiff individually, and the only reason this claim survived the pleading stage was because the tenth cause of also encompassed Plaintiff’s allegations concerning his Promissory Notes, a direct claim.
d. Plaintiff’s Claim for Legal Fees
Lastly, the tenth cause of action asserts a claim for “damages sustained by Rogers in order to mitigate against and reverse the illegal acts committed by Cong,” i.e., Plaintiff’s legal fees. (4AC, ¶ 179(e), 109.) The Court agrees with FEV that Plaintiff cannot recover such fees as he has not alleged an entitlement to them. California (and Delaware) follows the American Rule, and thus except as provided by statute or contract, each side in this action is to bear its own fees. No contractual basis for this request is identified by Plaintiff, and his claimed statutory basis (Corp. Code §§ 2115(f) and 1603) provide for fees “from the corporation” in an inspection demand lawsuit- not from a stockholder or controller of that corporation. Finally, even if Plaintiff had identified a basis for such fees, FEV has demonstrated that there is no merit to the claims asserted in the tenth cause of action.
e. Conclusion
As FEV has demonstrated that all of the claims upon which the tenth cause of action are predicated lack merit, and Plaintiff has failed to establish the existence of a triable issue of material fact in opposition, FEV is entitled to summary adjudication of this cause of action.
3. Remaining Causes of Action
a. Eleventh Cause of Action (California Unfair Competition Law)
FEV argues that summary adjudication of this claim is warranted because it is based on a subset of the same allegations as the tenth cause of action that the defendants acted so that Innogy could acquire iTy’s assets for less than fair market value via contracts between the two companies that gave improper dividends in the form of prioritized overpayments, and because he cannot prove the tenth cause of action for the reasons discussed above, he cannot prove this claim either. (4AC, ¶¶ 182-183, 186.) Further, FEV continues, Plaintiff lacks standing to pursue this claim, which as alleged is derivative in nature. The Court finds both of these arguments persuasive.
First, on the issue standing, restitution is the only monetary remedy permitted in a private UCL cause of action (see Bus. & Prof. Code, § 17203), and a claim under the UCL is limited to those who have “suffered an injury in fact and ha[ve] lost money or property as a result of” the alleged wrongful conduct” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 321). If FEV (as Innogy) acquired iTy’s assets for less than fair market value via contracts between the two companies, any “money or property” lost would be that belonging to iTy, not Plaintiff, and therefore Plaintiff lacks standing to bring this claim.
Second, as Plaintiff’s UCL claim is predicated on some of the same acts as the tenth cause of action, and FEV has established that it is entitled to summary adjudication of that claim, it follows that FEV is also entitled to adjudication of this cause of action.
b. Seventh Cause of Action (Declaratory Relief)
In the seventh cause of action, Plaintiff seeks five different declarations, three of which are premised on iTy being governed by the California Corporations Code. (4AC, ¶¶ 151, 160(a), (d) and (e).) But as it is undisputed that iTy is a Delaware corporation, and this Court has concluded that Delaware law applies to Plaintiff’s claims, these three demands are untenable.
Plaintiff also seeks a declaration affirming his “Continuous Service Status” under his Stock Purchase Agreement and the consequences of that status on his stock and options. (4AC, ¶¶ 155, 160(b).) There is no basis for such a declaration because as discussed above, “Continuous Service Status” is defined as “the absence of any interruption or termination of service of an Employee or Consultant,” and FEV has demonstrated that Plaintiff’s employment with iTy ended by October 7, 2016, and his tenure as director ended on January 31, 2017. (SSUF Nos. 45, 46, 57, 58, 163, 164.) Further, as iTy is no longer a going concern and has no employees (SSUF No. 165), there is no justiciable controversy as to employment left to litigate. The same lack of a justiciable controversy eliminates Plaintiff’s remaining demand for a declaration that iTy cannot prepay to redeem his Promissory Notes because they have already been converted and therefore no longer exist. (SSUF No. 167.) Consequently, the Court agrees with FEV that it is entitled to summary adjudication of the seventh cause of action.
c. Ninth Cause of Action (Injunctive Relief)
Finally, FEV asserts that it is entitled to summary adjudication of the ninth cause of action because, as previously recognized by the Court, injunctive relief is not a standalone cause of action but relies on the underlying claims, i.e., the fourth, tenth, eleventh and fourteenth causes of action, and as Plaintiff cannot succeed on those claims, he cannot obtain the relief sought here. Further, it continues, and the Court agrees, as iTy is no longer a going concern and has no employees (SSUF No. 169), there is no justiciable controversy because the demands made are predicated on a functioning iTy.
Because the Court has determined that FEV is entitled to adjudication of all of the underlying claims, it agrees with FEV that it is entitled adjudication of the ninth cause of action as well.
4. Mr. Cong and iTy’s Request for Summary Judgment, or in the Alternative, Summary Adjudication
a. Fourth and Fourteenth Causes of Action: Breach of Fiduciary Duty and Aiding and Abetting the Breach
As Mr. Cong owed fiduciary duties to iTy based on his role as a director and officer, the basis for his request for summary adjudication of these claims is not that he did not owe such duties, as FEV argues in support of its own request for adjudication, but that there were no breaches as demonstrated by FEV. The Court agrees. The evidence submitted by FEV and cited by Mr. Cong and iTy establishes that:
▪ Plaintiff’s promissory notes were converted, not repurchased, on the same terms as every other noteholder (see Mr. Cong and iTy’s Separate Statement of Undisputed Material Facts in Support of Motion for Summary Judgment/Adjudication (“UMF”) Nos. 30-32);
▪ Mr. Cong had no fiduciary duty to maintain Plaintiff’s position on the Board and the iTy common shareholders validly voted to remove him (UMF Nos. 37, 38, 41);
▪ Any claim for damages cause by Mr. Cong continuing to operate iTy and seeking funding to do so would be experienced by iTy and all of its shareholders and thus would be derivative in nature;
▪ Mr. Cong did not have a fiduciary duty to maintain Plaintiff’s employment with iTy;
▪ Mr. Cong sent Plaintiff unsigned term sheets before any agreement with FEV was entered into (UMF No. 60);
▪ Any damages resulting from iTy entering into a “bad” contract would be derivative because they would be experienced by iTy and all of its shareholders;
▪ Mr. Cong did not create or exploit any conflict on the Board and Plaintiff repeatedly indicated that he welcomed investment and iTy’s continued operation (UMF Nos. 119-126);
▪ Any damages caused by Board conflicts would be experienced by iTy and its shareholders and would therefore be derivative;
▪ iTy still owns its business, records and assets and thus there is no basis to the allegation that FEV seized them, and any alleged related damages would be experienced by iTy and its shareholders and not Plaintiff personally (UMF No. 71); and
▪ The obligation to permit the inspection of corporate records is statutory and not fiduciary in nature and belongs to iTy.
Because Plaintiff fails to raise a triable issue of material fact as to any of the foregoing “breaches” for the reasons articulated above, the Court finds that Mr. Cong is entitled to summary adjudication of the fourth and fourteenth causes of action, and iTy is entitled to summary adjudication of the fourteenth.
b. Tenth Cause of Action: Breach of Fiduciary Duty
As with the preceding causes of action, Mr. Cong asserts, and the Court agrees, that he is entitled to summary adjudication of the tenth cause of action because none of the underlying “breaches” have any merit as demonstrated by FEV, to wit:
▪ Plaintiff’s promissory notes were converted, not repurchased, on the same terms as all other noteholders (UMF Nos. 30-32);
▪ Mr. Cong had no fiduciary duty to maintain Plaintiff on the Board and the iTy common shareholders voted to remove him (UMF Nos. 37, 38, 41);
▪ Mr. Cong had no fiduciary duty to maintain Plaintiff’s employment with iTy;
▪ Any damages resulting from iTy entering into a “bad” contract would be derivative because they would be experienced by iTy and all of its shareholders; and
▪ There is no contractual or statutory basis for legal fees to be recovered from Mr. Cong.
Because Plaintiff fails to raise a triable issue of material fact as to any of the foregoing “breaches” or claims for damages for the reasons articulated above, the Court finds that Mr. Cong is entitled to summary adjudication of the tenth cause of action.
c. Eleventh Cause of Action: UCL Claim
The Court agrees with Mr. Cong that he is entitled to summary adjudication of this cause of action because the (1) it is based on a subset of allegations in the tenth cause of action and those lack merit and (2) any damages would be experienced by iTy and all of its shareholders and not Plaintiff directly.
d. Seventh Cause of Action: Declaratory Relief
The Court further concludes that Mr. Cong and iTy are entitled to summary adjudication of the seventh cause of action for the same reasons as FEV, i.e., because: iTy is not governed by the California Corporations Code (UMF Nos. 160-162); Plaintiff ceased to be an iTy employee by October 7, 2016 (UMF No. 164); iTy is no longer a going concern and has no employees (UMF No. 165); and Plaintiff’s promissory notes were converted, not redeemed, and thus no longer exist (UMF No. 167).
e. Ninth Cause of Action: Injunctive Relief
Finally, the Court finds that Mr. Cong and iTy are entitled to summary adjudication of the remaining claim at issue because, as previously recognized by the Court, injunctive relief is not a standalone cause of action but relies on the underlying claims, i.e., the fourth, tenth, eleventh and fourteenth causes of action, and as Plaintiff cannot succeed on those claims, he cannot obtain the relief sought here.
C. Conclusion
FEV’s motion for summary judgment is GRANTED. Mr. Cong and iTy’s request for summary adjudication of the fourth, seventh, ninth, tenth, eleventh and fourteenth causes of action is GRANTED.
The Court will prepare the order.
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[1] The Court notes a misnomer in the operative complaint, which should be “First Amended Class Action Complaint.”
[2] See Order Concerning Plaintiff Daniella Velasquez’s Motions to Compel Defendant ChargePoint, Inc. to Provide Further Responses to (1) Plaintiff’s Special Interrogatories (Set One) Nos. 1-4 and (2) Plaintiff’s Requests for Production of Documents (Set One) Nos. 10-21, 23-25, 27 and 29, and Request for Monetary Sanctions, filed on April 4, 2023.
[3] See Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554.
[4] The VTA has been dismissed from the Fritch, Davallou, and Mejia suits with prejudice.
[5] The objections were not filed in a separate document in every case but they are mentioned in each opposition to the County’s demurrer.
[6] The Court notes that the copy of the agreement between Universal Protection and the VTA is missing page 10 in the request for judicial notice in Fritch. However, the version of the Universal Protection Agreement attached to the operative Complaint and the request for judicial notice in Lane both contain page 10.
[7] All further undesignated statutory references are to the Code of Civil Procedure.
[8] Universal Protection does not demur to the wrongful death cause of action.
[9] If the contract on which a breach of contract claim is founded is written, “the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.” (Otworth v. Southern Pacific Transportation Co. (1985) 166 Cal.App.3d 452, 459.) Alternatively, “[i]n an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199.)
[10] The breach of contract claim does not list VTA as a defendant.
[11] FEV employee Roland Hess was dismissed from this action by order dated May 31, 2023.
[12] On December 2, 2019, FEV and Innogy SE filed a petition for writ of mandate and request for an immediate stay of the action with the Court of Appeal. Their petition and request were denied in May 2020.
[13] In the past, the Court has declined to resolve the choice of law issues because California and Delaware law are generally in accord with respect to the claims at issue.
[14] Michael Stark was not a Board member.
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