On 06/06/2019 RESTAURANT RETAIL FINANCIAL MANAGEMENT GROUP, INC , A CALIFORNIA CORPORATION filed a Contract - Other Contract lawsuit against WETHERBEE RESTAURANTS, INC , A CALIFORNIA CORPORATION. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is WENDY CHANG. The case status is Pending - Other Pending.
Pending - Other Pending
RESTAURANT & RETAIL FINANCIAL MANAGEMENT GROUP INC. A CALIFORNIA CORPORATION
WETHERBEE RESTAURANTS INC. A CALIFORNIA CORPORATION DBA JOE'S CAFE
6/20/2019: Civil Case Cover Sheet - Civil Case Cover Sheet Amended
6/20/2019: Amended Complaint - Amended Complaint
6/20/2019: Summons - Summons Amended
6/6/2019: Complaint - Complaint
6/6/2019: Summons - Summons on Complaint
6/6/2019: Civil Case Cover Sheet - Civil Case Cover Sheet
6/6/2019: First Amended Standing Order - First Amended Standing Order
6/6/2019: Notice of Case Assignment - Limited Civil Case - Notice of Case Assignment - Limited Civil Case
Updated -- Amended Complaint 1st: Name Extension: 1st; As To Parties changed from Wetherbee Restaurants, Inc., a California corporation (Defendant) to Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Summons Amended; Issued and Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff); As to: Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Civil Case Cover Sheet Amended; Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff)Read MoreRead Less
amended complaint; Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff); As to: Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Amended Complaint; Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff); As to: Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Non-Jury Trial scheduled for 12/03/2020 at 08:30 AM in Stanley Mosk Courthouse at Department 94Read MoreRead Less
Order to Show Cause Re: Failure to File Proof of Service scheduled for 06/09/2022 at 08:30 AM in Stanley Mosk Courthouse at Department 94Read MoreRead Less
Case assigned to Hon. Wendy Chang in Department 94 Stanley Mosk CourthouseRead MoreRead Less
Complaint; Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff); As to: Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Summons on Complaint; Issued and Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff); As to: Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Civil Case Cover Sheet; Filed by: Restaurant & Retail Financial Management Group, Inc., a California corporation (Plaintiff); As to: Wetherbee Restaurants, Inc., a California corporation (Defendant)Read MoreRead Less
Notice of Case Assignment - Limited Civil Case; Filed by: ClerkRead MoreRead Less
First Amended Standing Order; Filed by: ClerkRead MoreRead Less
Case Number: 19STLC05479 Hearing Date: July 10, 2020 Dept: 50
restaurant & retail financial management group, inc.,
wetherbee restaurants, inc., et al.
July 10, 2020
[TENTATIVE] ORDER RE:
CROSS-DEFENDANTS RESTAURANT & RETAIL MANAGEMENT GROUP, INC. AND WAYNE LIPSCHITZ’S DEMURRERS TO CROSS-COMPLAINT OF CROSS-COMPLAINANT WETHERBEE RESTAURANTS, INC.;
CROSS-DEFENDANTS RESTAURANT & RETAIL MANAGEMENT GROUP, INC. AND WAYNE LIPSCHITZ’S MOTION TO STRIKE THE ALTER EGO ALLEGATIONS OF CROSS-COMPLAINANT WETHERBEE RESTAURANTS, INC.’S CROSS-COMPLAINT
AND RELATED CROSS-ACTION
Plaintiff Restaurant & Retail Financial Management Group, Inc. (“RRFMG”) filed this action on June 6, 2019 against Defendant Wetherbee Restaurants, Inc. dba Joe’s Café (“Wetherbee”). The operative First Amended Complaint was filed on June 20, 2019, and asserts claims for money due to RRFMG from Wetherbee for the provision of accounting services. On December 19, 2019, Wetherbee filed a Cross-Complaint against RRFMG and Cross-Defendant Wayne Lipschitz (“Lipschitz”) for accounting malpractice, breach of written agreement, and breach of fiduciary obligation.
Cross-Defendants RRFMG and Lipschitz (jointly, “Cross-Defendants”) now demur to each of the causes of action of the Cross-Complaint on the ground that each fails to state facts sufficient to constitute a cause of action. Cross-Defendants also move to strike the alter ego allegations from the Cross-Complaint. Wetherbee opposes both.
The Court notes that Wetherbee filed an objection on March 16, 2020 to any reply brief that may have been filed by Cross-Defendants on the grounds that the reply was untimely. It appears that the reply brief was filed on March 11, 2020. In light of the fact that the hearing on the demurrer and motion to strike was continued and Wetherbee has had access to the reply brief on line, the Court exercises its discretion to consider the reply and overrules the objection.
A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff's proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar (1967) 67 Cal.2d 695, 713.)
The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., §436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437, subd. (a).)
First, Cross-Defendants contend that the second cause of action for breach of contract must fail against Lipschitz because Lipschitz is not a party to the underlying contract. As alleged in the Cross-Complaint, Wetherbee and RRFMG entered into an engagement agreement for RRFMG to provide accounting services for Wetherbee, including paying bills, maintaining payable files, preparing checks, handling vendor accounts, recording payroll, and preparing financial statements and tax documents. (Cross-Compl., ¶¶ 7-8, Ex. A.) In order to state a contract cause of action against Lipschitz, Wetherbee alleges that Lipschitz is an alter ego of RRFMG. (Cross-Compl., ¶ 3.) In particular, Wetherbee alleges that Lipschitz is a Certified Public Accountant licensed by the State of California who controls the business affairs of RRFMG, commingled funds and assets of RRFMG with his own, diverted corporate funds and assets for his own purposes, disregarded legal formalities, inadequately capitalized RRFMG, held himself out as personally liable for the debts of RRFGM, used RRFGM as a mere corporate shell, instrumentality or conduit for himself and his individual business, used RRFMG to procure labor, services, or merchandise for other persons or entities, used RRFMG to conceal his ownership, management, and financial interests, and used RRFMG to shield himself against personal obligations. (Cross-Compl., ¶ 3.)
To invoke the alter ego doctrine, the plaintiff must plead “such a unity of interest and ownership that the separate personalities of the corporation and the individuals do not exist, and that an inequity will result if the corporate entity is treated as the sole actor.” (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.) Factors to consider in applying the doctrine include the commingling of funds and other assets, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, identical directors and officers, and use of one as a mere shell or conduit for the affairs of the other. (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538-539.) Although Cross-Defendants argue that the alter ego allegations are conclusory, they are sufficient for purposes of overcoming demurrer. (See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-236 [finding that plaintiff was only required to allege “ultimate rather than evidentiary facts” in support of alter ego theory].) Unlike in Leek v. Cooper (2011) 194 Cal.App.4th 399, where the Court of Appeal held that allegations that the individual defendant was the “sole owner” of the corporate defendant and that the individual defendant owned all of the corporate defendant’s stock and made “all of its business decisions personally” was insufficient to establish alter ego liability, here, Wetherbee has alleged ultimate facts showing a unity of interest and inequitable result if the corporate defendant is treated as the sole actor. (Id. at p. 415.) For these reasons, the Court also denies Cross-Defendants’ motion to strike the alter ego allegations.
Next, Cross-Defendants contend that the first cause of action for negligence (accounting malpractice) must fail because no facts are alleged that establish a legal duty of care. Cross-Defendants argue that at most, Wetherbee has alleged a breach of contract, and without more facts, Wetherbee cannot recover tort damages for such a breach. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 551 [noting that “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law”].) Wetherbee counters that accountants “have a duty to exercise the ordinary skill and competence of members of their profession, and a failure to discharge that duty will subject them to liability for negligence.” (Lindner v. Barlow, Davis & Wood (1962) 210 Cal.App.2d 660, 665.) Therefore, the Court finds that Wetherbee has properly alleged a cause of action for negligence in addition to breach of contract. (Cross-Compl., ¶ 10 [alleging that Cross-Defendants’ “negligent and careless conduct fell below the applicable standard of care applicable to the services that were to have been rendered”].)
However, as to the breach of fiduciary duty cause of action, the Court finds that Wetherbee has failed to show the existence of a fiduciary duty. The Court notes that although Wetherbee asserts in a conclusory manner that a fiduciary duty exists, the only case cited by Wetherbee is Lindner, which, as set forth above, only creates a duty of ordinary care on the part of accountants. A fiduciary duty, on the other hand, arises only in special relationships that are either “imposed by law [or] undertaken by agreement.” (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 632.) Here, Wetherbee offers no authority for the proposition that the typical accountant-client relationship creates a fiduciary obligation, nor does Wetherbee allege any facts which support the creation of such obligations. (See Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1161 [noting that the essential elements of a fiduciary relationship are (1) “the vulnerability of one party to the other which (2) results in the empowerment of the stronger party by the weaker which (3) empowerment has been solicited or accepted by the stronger party and (4) prevents the weaker party from effectively protecting itself”].) Therefore, the Court finds that Wetherbee has failed to state facts sufficient to constitute a cause of action for breach of fiduciary duty against Cross-Defendants.
Lastly, Cross-Defendants also move to strike the allegation in paragraph 3 of the Cross-Complaint alleging that Lipschitz was at all times a Certified Public Accountant licensed in the state of California. Cross-Defendants assert that Lipschitz is listed as “INACTIVE” on the California Board of Accountancy website and did not perform work as a Certified Public Accountant in connection with this matter. Cross-Defendants also request that the Court take judicial notice of the fact of Lipschitz’s inactive status. (Mot., p. 7: 18-21, Ex. 1.) The Court denies the request for judicial notice as irrelevant. Even if Lipschitz was inactive as a Certified Public Accountant on November 22, 2019 (as set forth in Exhibit 1), that does not mean that he was not an active Certified Public Accountant during the period alleged in the Cross-Complaint.
Based on the foregoing, the Court overrules Cross-Defendants’ demurrer to the first and second causes of action. The Court sustains Cross-Defendants’ demurrer to the third cause of action for breach of fiduciary duty, with leave to amend.
The Court denies Cross-Defendants’ motion to strike in its entirety.
The Court orders Wetherbee to file and serve an amended cross-complaint, if any, within 20 days of the date of this order. If no amended cross-complaint is filed, the Court orders Cross-Defendants to file their answer to the Cross-Complaint within 30 days of the date of this order.
Cross-Defendants are ordered to give notice of this ruling.
DATED: July 10, 2020 ________________________________
Hon. Teresa A. Beaudet
Judge, Los Angeles Superior Court
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