This case was last updated from Los Angeles County Superior Courts on 10/13/2020 at 02:18:52 (UTC).

ALEXANDRIA EQUITIES NO.7 LLC VS PRECISION AGRITECH INC.,

Case Summary

On 05/14/2018 ALEXANDRIA EQUITIES NO 7 LLC filed a Contract - Other Contract lawsuit against PRECISION AGRITECH INC . This case was filed in Los Angeles County Superior Courts, Norwalk Courthouse located in Los Angeles, California. The Judges overseeing this case are LORI ANN FOURNIER and MARGARET MILLER BERNAL. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****7132

  • Filing Date:

    05/14/2018

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Norwalk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

LORI ANN FOURNIER

MARGARET MILLER BERNAL

 

Party Details

Plaintiffs and Cross Defendants

ALEXANDRIA EQUITIES NO. 7 LLC

AGTECH ACCELERATOR CORPORATION

Defendants and Cross Plaintiffs

PRECISION AGRITECH INC.

ELLESTAD ERIC

VAIL MATTHEW

Cross Plaintiffs

PRECISION AGRITECH INC

ELLESTAD ERIC

Attorney/Law Firm Details

Plaintiff and Cross Defendant Attorneys

COOLEY LLP

GUNN ESQ. PATRICK PHILIP

ELLIOTT LAURA MARIE

GUNN PATRICK

HOUSKA DAVID SAMUEL

Defendant and Cross Plaintiff Attorneys

WITTENBERG LAW APC

ARENT FOX LLP

WITTENBERG ESQ. JEFFREY MARK

GILBERT JACOB M.

HART ESQ. KIRSTEN ANNE

HART KIRSTEN ANNE

 

Court Documents

Minute Order - MINUTE ORDER (COURT ORDER)

5/6/2020: Minute Order - MINUTE ORDER (COURT ORDER)

Notice - NOTICE NOTICE OF COURT ORDER CONTINUING APRIL 28, 2020 CONFERENCES TO JULY 10, 2020

4/17/2020: Notice - NOTICE NOTICE OF COURT ORDER CONTINUING APRIL 28, 2020 CONFERENCES TO JULY 10, 2020

Minute Order - MINUTE ORDER (COURT ORDER)

3/24/2020: Minute Order - MINUTE ORDER (COURT ORDER)

Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER)

2/3/2020: Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER)

Notice - NOTICE OF CONTINUED HEARING RE CROSS-DEF AGTECH'S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT

1/13/2020: Notice - NOTICE OF CONTINUED HEARING RE CROSS-DEF AGTECH'S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT

Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10); HEA...)

12/5/2019: Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITH MOTION TO STRIKE (CCP 430.10); HEA...)

Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF CROSS-DEFENDANT AGTECH ACCELERATOR CORPORATION'S DEMURRER TO AGRITECH'S FIRST AMENDED CROSS-COMPLAINT

7/8/2019: Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF CROSS-DEFENDANT AGTECH ACCELERATOR CORPORATION'S DEMURRER TO AGRITECH'S FIRST AMENDED CROSS-COMPLAINT

Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITHOUT MOTION TO STRIKE; HEARING ON MO...)

3/19/2019: Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITHOUT MOTION TO STRIKE; HEARING ON MO...)

Declaration - Declaration OF ERIC ELLESTAD IN SUPPORT OF DEFENDANT PRECISION AGRITECH, INC.S OPPOSITION TO ALEXANDRIA EQUITIES NO. 7 LLCS SPECIAL MOTION TO STRIKE PRECISION AGRITECHS CROSS-COMPLAIN

1/23/2019: Declaration - Declaration OF ERIC ELLESTAD IN SUPPORT OF DEFENDANT PRECISION AGRITECH, INC.S OPPOSITION TO ALEXANDRIA EQUITIES NO. 7 LLCS SPECIAL MOTION TO STRIKE PRECISION AGRITECHS CROSS-COMPLAIN

Demurrer - with Motion to Strike (CCP 430.10) - to Plaintiff Alexandria Equities No. 7, LLC's Second Amended Complaint

10/10/2018: Demurrer - with Motion to Strike (CCP 430.10) - to Plaintiff Alexandria Equities No. 7, LLC's Second Amended Complaint

Notice - Notice of Rescheduled Hearing on Defendant Precision Agritech, Inc.'s Demurrer and Motion to Strike Plaintiff's Second Amended Complaint

10/26/2018: Notice - Notice of Rescheduled Hearing on Defendant Precision Agritech, Inc.'s Demurrer and Motion to Strike Plaintiff's Second Amended Complaint

Notice -

8/16/2018: Notice -

Amended Complaint -

8/16/2018: Amended Complaint -

Request for Judicial Notice -

8/16/2018: Request for Judicial Notice -

Notice -

9/18/2018: Notice -

Proof of Service of Summons and Complaint -

8/24/2018: Proof of Service of Summons and Complaint -

163 More Documents Available

 

Docket Entries

  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Status Conference Re: Bankruptcy

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Status Conference Re: Bankruptcy

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Order to Show Cause Re: regarding answer/responsive pleading by cross defendant Agtech Accelerator to the operative cross complaint

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Order to Show Cause Re: regarding answer/responsive pleading by cross defendant Agtech Accelerator to the operative cross complaint

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Order to Show Cause Re: Dismissal

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Order to Show Cause Re: Dismissal

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Trial Setting Conference

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Trial Setting Conference

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Case Management Conference

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  • 12/10/2020
  • Hearing12/10/2020 at 13:30 PM in Department F at 12720 Norwalk Blvd., Norwalk, CA 90650; Case Management Conference

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321 More Docket Entries
  • 07/09/2018
  • DocketMemorandum of Points & Authorities

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  • 07/09/2018
  • DocketDeclaration; Filed by ALEXANDRIA EQUITIES NO. 7 LLC (Plaintiff)

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  • 07/09/2018
  • DocketPoints and Authorities; Filed by ALEXANDRIA EQUITIES NO. 7 LLC (Plaintiff)

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  • 07/09/2018
  • DocketDeclaration

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  • 06/14/2018
  • DocketAmended Complaint; Filed by ALEXANDRIA EQUITIES NO. 7 LLC (Plaintiff)

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  • 06/12/2018
  • DocketDeclaration; Filed by PRECISION AGRITECH INC., (Defendant)

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  • 05/14/2018
  • DocketCivil Case Cover Sheet; Filed by ALEXANDRIA EQUITIES NO. 7 LLC (Plaintiff)

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  • 05/14/2018
  • DocketSummons; Filed by Plaintiff

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  • 05/14/2018
  • DocketComplaint filed-Summons Issued

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  • 05/14/2018
  • DocketNotice of Case Management Conference; Filed by Clerk

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Tentative Rulings

Case Number: VC067132    Hearing Date: July 08, 2020    Dept: SEC

ALEXANDRIA EQUITIES NO. 7, LLC v. PRECISION AGRITECH, INC.

CASE NO.: VC067132

HEARING: 07/08/2020

[Remote appearances are encouraged and will be given priority.]

#4

TENTATIVE RULING

Cross-Defendant Agtech Accelerator Corporation’s demurrer to the First Amended Cross-Complaint is OVERRULED. CCP §430.10(e).

Cross-Complainant to give notice.

Cross-Defendant’s Request for Judicial Notice is GRANTED as to the Exhibit A to the Request for Judicial Notice (Agritech’s Bankruptcy Petition). (Cal. Ev. Code §452.)

Cross-Defendant’s Request for Judicial Notice is GRANTED as to the existence of the documents, but not as to any hearsay statements therein as to Exhibits 1, 2, and 3 of the Dombrosky Declaration. Exhibits 1, 2, and 3 of the Dombroksy Declaration seek judicial of various contracts and agreements at issue in this case—Term Sheet for Series A Preferred Stock Financing; Vertical Farm Produce Addendum; and Walmart Grocery Merchandise Agreement. The demurrer is limited to the four corners of the FAXC and any additional facts which are properly the subject of judicial notice. (CCP §430.30(a).) “In ruling on a demurrer, a court may consider facts of which it has taken judicial notice. [Citation.] This includes the existence of a document. When judicial notice is taken of a document, however, the truthfulness and proper interpretation of the document are disputable. [Citations Omitted.]” (Fremont General Corp. (2007) 148 Cal.App.4th 97, 113.) “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning. [Citation.] On a demurrer a court’s function is limited to testing the legal sufficiency of the complaint. [Citation.] A demurrer is simply not the appropriate procedure for determining the truth of disputed facts. [Citation.] The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness and proper interpretation are disputable. [Citation.] …. [J]udicial notice of matters upon demurrer will be dispositive only in those instances where there is not or cannot be a factual dispute concerning that which is sought to be judicial noticed.” [Citation.]” (Id. at 113-1140)

On June 25, 2020, this Court substituted Eric Ellestad for Precision Agritech, Inc. as Cross-Complainant in this action pursuant to the parties’ Stipulation to substitute Eric Ellestad for Precision Agritech, Inc. as Cross-Complainant in the instant Cross-Complainant against AgTech Accelerator Corporation FILED on June 24, 2020.

This action was filed by Plaintiff ALEXANDRIA EQUITIES No. 7, LLC (“Plaintiff”) on May 14, 2018. On August 16, 2018, Cross-Complainant Precision Agritech, Inc./Eric Ellestad (“Cross-Complainant”) filed a Cross-Complainant against Plaintiff and Cross-Defendant Agtech Accelerator Corporation (“Accelerator”), asserting causes of action for declaratory relief, fraud-intentional misrepresentation, intentional interference with contract, negligent interference with prospective economic advantage, intentional interference with prospective economic advantage, and unfair competition in violation of Bus. & Prof. Code §17200.

Cross-Complainant’s First Amended Cross-Complaint (“FAXC”), at issue here, was FILED on June 3, 2019. The relevant facts are as follows: Precision Agritech, Inc. (“Agritech”) is a start-up company in the business of indoor farming. In or about October 2017, Agritech entered into negotiations with Cross-Defendant Agtech Accelerator Corporation (“Accelerator”) regarding Accelerator’s potential investment in Agritech. (FAXC ¶1.) While those negotiations were ongoing, Accelerator facilitated bridge financing with its affiliate, Alexandria Equities No. 7, LLC, whereby Alexandria purchased two promissory notes totaling $5 million. (FAXC ¶3.) During the course of the negotiations, Accelerator performed due diligence and was provided access to Agritech’s confidential and proprietary information. (FAXC ¶2.) On or about November 30, 2017, Accelerator and Agritech entered into the first of three consecutive term sheets, each of which contained a “no-shop clause” prohibiting Agritech from soliciting alternative funding. Agritech relied in good faith on Accelerator’s intent to consummate the deals. The FAXC alleges that Accelerator never secured any funding, but instead “insisted on progressively onerous . . . terms in negotiation of subsequent term sheets” in an attempt to “run Agritech out of business.” The negotiations between Accelerator and Agritech broke down in April 2018. (FAXC ¶¶4-6.) The FAXC further alleges that “Accelerator’s sharp practices and failure to obtain any funding combined with Alexandria’s bad faith conduct has interfered with [Cross-Complainant’s] existing contract with Walmart and prospective contracts with Coastal Sunbelt Produce, Sysco, Tender Greens, and Mendocino Farms Sandwich Market.” (FAXC ¶8.)

The subject FAXC asserts the following causes of action: (1) Intentional Interference with Contract; and (2) Unfair Competition in Violation of Bus. & Prof. Code §17200.

Accelerator demurs to each of these causes of action pursuant to CCP §430.10(e). The Court notes that Accelerator’s general demurrer to the FAXC on the basis that Agritech lacks standing to sue is rendered MOOT by the Order of June 25, 2020.

First Cause of Action – Intentional Interference with Contract

To state a claim for intentional interference with contractual relations, a plaintiff (or cross-complainant) must allege (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship caused by the defendant; and (5) resulting damage. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal. 3d 1118, 1126.)

The demurrer to the first cause of action is overruled. Cross-Complainant adequately alleges the existence of a valid contract between cross-Complainant and a third party—Walmart, and Accelerator’s knowledge thereof. (FAXC ¶37.) Cross-Complainant also alleges that “the Accelerator intentionally and maliciously caused the breakdown of negotiations with Agritech with the intent to disrupt Agritech’s fulfillment of its obligations under the Walmart contract and injure Agritech by harming its relationship with its customer.” (FAXC ¶38.) Lastly, Cross-Complainant alleges that “[d]ue to the Accelerator’s conduct, Agritech was not able to meet its minimum requirements pursuant to its Walmart contract. Agritech’s breach of the minimum requirements of its Walmart contract was directly and proximately due to the Accelerator’s conduct, and Agritech would have satisfied its obligations absent the Accelerator’s unlawful conduct.” (FAXC ¶39.)

These allegations are sufficient to withstand demurrer. The arguments raised by Accelerator in the instant demurrer raise factual determinations inappropriately decided at this stage in the litigation. The demurrer to the first cause of action is OVERRULED.

Second Cause of Action – Unfair Competition in Violation of Bus. & Prof. Code §17200

Business & Professions Code §17200 prevents “any unlawful, unfair or fraudulent business act or practice.” The second cause of action incorporates the prior allegations in the FAXC, including the claim for intentional interference with contract. (FAXC ¶41.) “Virtually any law or regulation—federal or state, statutory or common law—can serve as a predicate for a Business and Professions Code section 17200 ‘unlawful’ violation.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)

Accelerator argues that the FAXC does not specifically identify unlawful conduct to substantiate the UCL claim. However, a demurrer views the pleading as a whole to see whether it states a cause of action. (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) Here, and as indicated above, the FAXC adequately alleges a cause of action for intentional interference with contract. Therefore, the second cause of action is supported by the intentional interference with contract claim. The demurrer to the second cause of action is OVERRULED.

Case Number: VC067132    Hearing Date: March 18, 2020    Dept: SEC

ALEXANDRIA EQUITIES NO. 7, LLC v. PRECISION AGRITECH, INC.

CASE NO.: VC067132

HEARING: 03/18/2020

JUDGE: OLIVIA ROSALES

IN RESPONSE TO THE COVID-19 PANDEMIC AND THE GENERAL ORDER OF THE PRESIDING JUDGE, THE MATTER IS CONTINUED.

#12

TENTATIVE RULING

Cross-Defendant Agtech Accelerator Corporation’s demurrer to the first amended cross-complaint of Cross-Complainant Precision Agritech, Inc. is CONTINUED to Wednesday, June 10, 2020 at 1:30 p.m. in Dept. SE-C.

Case Number: VC067132    Hearing Date: February 13, 2020    Dept: SEC

ALEXANDRIA EQUITIES NO. 7, LLC v. PRECISION AGRITECH, INC.CASE NO.: VC067132HEARING: 02/13/2020Calendar Matter#10

TENTATIVE RULING

Cross-Defendant Agtech Accelerator Corporation’s demurrer to the first amended cross-complaint of Cross-Complainant Precision Agritech, Inc. is SUSTAINED without leave to amend.

Cross-Defendant to give notice.

On January 9, 2020, the Court CONTINUED this matter to Thursday, February 13, 2020 at 1:30 p.m. in Dept. SE-C so that Cross-Complainant may cure the standing defect. As of February 11, 2020, no papers or evidence have been filed or lodged with the Court to indicate that such standing defect has been cured.Cross-Defendant to give notice.

Case Number: VC067132    Hearing Date: January 21, 2020    Dept: SEC

ALEXANDRIA EQUITIES NO. 7 LLC v. PRECISION AGRITECH, INC.

CASE NO.:  VC067132

HEARING:  1/21/20

JUDGE: OLIVIA ROSALES

#9

TENTATIVE ORDER

Plaintiff Alexandria Equities No. 7 LLC’s motion to sever claims against individual Defendants is DENIED without prejudice.

Moving Party to give NOTICE.

Plaintiff Alexandria Equities No. 7 LLC moves to sever claims pursuant to CCP § 1048.

The motion is DENIED without prejudice. The determination regarding severance of claims is best reserved for the trial judge in this matter.

Case Number: VC067132    Hearing Date: January 09, 2020    Dept: SEC

ALEXANDRIA EQUITIES NO. 7, LLC v. PRECISION AGRITECH, INC.

CASE NO.: VC067132

HEARING: 1/9/20

JUDGE: OLIVIA ROSALES

#7

TENTATIVE RULING

Cross-Defendant Agtech Accelerator Corporation’s demurrer to the first amended cross-complaint of Cross-Complainant Precision Agritech, Inc. is CONTINUED to Thursday, February 13, 2020 at 1:30 p.m. in Dept. SE-C so that Cross-Complainant may cure the standing defect.

Cross-Defendant to give notice.

Relevant Background

Plaintiff Alexandria Equities No. 7, LLC (“Plaintiff”) filed the instant action on May 14, 2018.

On August 16, 2018, Cross-Complainant Precision Agritech, Inc. (“Cross-Complainant”) filed a cross-complaint against Plaintiff and Cross-Defendant Agtech Accelerator Corporation (“Cross-Defendant”), asserting causes of action for declaratory relief, fraud-intentional misrepresentation, intentional interference with contract, negligent interference with prospective economic advantage, intentional interference with prospective economic advantage, and unfair competition in violation of Business & Professions Code §17200.

On February 4, 2019, Cross-Complainant filed a Notice of Stay of Proceedings due to bankruptcy filing.

On May 1, 2019, Cross-Complainant filed a Request for Dismissal, dismissing Plaintiff from the cross-complaint.

On May 3, 2019, the Court denied (as moot) Plaintiff’s special motion to strike the cross-complaint due to the dismissal. The Court also sustained Cross-Defendant’s demurrer to the cross-complaint with leave to amend.

On June 3, 2019, Cross-Complainant filed a first amended cross-complaint against Cross-Defendant, asserting causes of action for intentional interference with contract and unfair competition in violation of Business & Professions Code §17200.

Legal Standard

“‘A demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice’ [Citations]; The allegations of the pleading demurred to must be regarded as true [Citations]; a demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading [Citations], or the construction placed on an instrument pleaded therein [Citation], or facts impossible in law [Citation], or allegations contrary to facts of which a court may take judicial knowledge. [Citations]” (South Shore Land Co. v. Peterson (1964) 226 Cal.App.2d 725, 732.)

“The following basic principle is also applicable to general demurrers, to wit: all that is necessary against a general demurrer is that upon a consideration of all the facts stated, it appears that the party whose pleading is attacked by such a demurrer is entitled to any relief at the hands of the court against his adversary, notwithstanding the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action or defense shown, or although the plaintiff, in his complaint, or the defendant, in his answer, may demand relief to which he is not entitled under the facts alleged. [Citation]” (Id. at 732-733.)

Request for Judicial Notice

Cross-Defendant’s request for judicial notice of the bankruptcy petition is granted. However, the Court will not take judicial notice of the truth of the matters asserted within the bankruptcy petition.

In light of the ruling, the Court will not address, at this time, Cross-Defendant’s remaining requests for judicial notice.

Discussion

Cross-Defendant demurs to Cross-Complainant’s first amended cross-complaint. Cross-Defendant argues Cross-Complainant lacks standing to bring its claims and Cross-Complainant failed to allege sufficient facts to constitute the causes of action for intentional interference with contract and unfair competition in violation of Business & Professions Code §17200.

Cross-Complainant lacks standing on the face of the cross-complaint and judicially noticed bankruptcy petition to assert the causes of action in the cross-complaint. Cross-Complainant filed a Voluntary Petition for Non-Individuals Filing for Bankruptcy (Chapter 7) on February 4, 2019. (RJN, Exhibit A.) “The widely accepted rule is that after a person files for bankruptcy protection, any causes of action previously possessed by that person become the property of the bankrupt estate. [Citations]” (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1001.) When Cross-Complainant filed for Chapter 7 bankruptcy protection, standing to maintain this lawsuit became vested in the bankruptcy trustee. (See Bostanian v. Liberty Savings Bank (1997) 52 Cal.App.4th 1075, 1079, 1080-1083.)

Cross-Complainant could “theoretically regain [its] lost standing to pursue [its] claims against [Cross-Defendant] if [its] claims were abandoned by the bankruptcy trustee. [Citation]” (Cloud at 1003.) “Property of a bankruptcy estate can be abandoned by three methods: (1) after notice and hearing, the trustee may unilaterally abandon property that is ‘burdensome…or…of inconsequential value’ [Citation]; (2) after notice and hearing, the court may order the trustee to abandon such property [Citation]; (3) any property which has been scheduled, but which has not been administered by the trustee at the time of closing of a case, is abandoned by operation of law. [Citation]” (Id.) However, Cross-Complainant did not “contend or plead that [its] claims…were abandoned by the trustee either unilaterally or pursuant to court order.” (Id.)

In opposition, Cross-Complainant concedes there is a standing defect and requests a short continuance to cure the defect. (Opposition, pgs. 6-8.) Cross-Complainant represents that a “separate, non-bankrupt entity has been in communication with the appointed Trustee…and is currently in the process of acquiring, inter alia, Agritech’s litigation rights in this matter” and that such “acquisition would correct the defect with standing and allow this matter to proceed on is merits.” (Opposition, pgs. 6-7.) (Declaration of Gilbert ¶¶2-6.)

In light of Cross-Complainant’s representation, Cross-Defendant’s demurrer to the first amended cross-complaint is continued so that Cross-Complainant may cure the standing defect. In light of the ruling, the Court will not, at this time, address Cross-Defendant’s argument that Cross-Complainant failed to allege sufficient facts to constitute the causes of action asserted in the first amended cross-complaint.

Case Number: VC067132    Hearing Date: December 05, 2019    Dept: SEC

ALEXANDRIA EQUITIES NO 7. LLC. v. PRECISION AGRITECH, INC.

CASE NO.:  VC067132

HEARING: 12/05/19

#8

TENTATIVE ORDER

  1. Defendants ERIC ELLESTAD and MATT VAIL’s Demurrer to Plaintiff’s Third Amended Complaint is OVERRULED. CCP §430.10(e).

  1. Defendants ERIC ELLESTAD and MATT VAIL’s Motion to Strike Portions of Plaintiff’s Third Amended Complaint is DENIED.

  2. Defendants ERIC ELLESTAD and MATT VAIL’s unopposed Motion to File Exhibit A to Defendants’ Request for Judicial Notice in Support of Defendants’ Demurrer to Plaintiff’s Third Amended Complaint and Motion to Strike Under Seal is GRANTED.

Plaintiff to give Notice.

Defendants ELLESTAD and VAIL’s (collectively “Defendants”) Request for Judicial Notice of the October 17, 2017 E-Mail between Matt Vail and Chris Otey and Attachments is DENIED. The demurrer is limited to the four corners of the TAC and any additional facts which are properly the subject of judicial notice. (CCP §430.30(a).) Although the existence of a document may be judicially noticeable, the truth of statements contained in the document and its proper interpretation are not subject to judicial notice if those matters are not reasonably disputable. (Unruh-Hazton v. Regents of University of California (2008) 162 Cal.App.4th 343, 364-365.) The contents and purpose of the October 17, 2017 E-Mail are reasonably disputable and may not necessarily contain facts which would render an otherwise facially valid complaint improper by conclusively negating an express allegation of the TAC. (See Columbia Casualty Co. v. Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 468.)

Defendants Requests for Judicial Notice of: (1) Plaintiff’s Ex Parte Application for Temporary Restraining Order and Order to Show Cause re: Preliminary Injunction and Accompanying Papers, filed on September 25, 2018; and (2) Plaintiff’s Notice of Motion and Motion for Leave to File a Third Amended Complaint and Accompanying Papers filed on December 6, 2018 is GRANTED as to the existence of the documents, but not as to any hearsay statements contained therein. “Evidence Code sections 452 and 453 permit the trial court to ‘take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in the documents such as orders, statements of decision, and judgments—but cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.’ [Citations.]” (People v. Harbolt (1997) Cal.App.4th 123, 126-127.)

This action for contractual fraud was filed by Plaintiff ALEXANDRIA EQUITIES NO. 7 LLC on May 14, 2018. On January 15, 2019, the subject Third Amended Complaint (“TAC”) was filed. Plaintiff alleges that it was misled and fraudulently induced into entering into an agreement to invest in “AgriTech” by Defendants. The TAC asserts the following causes of action: (1) Negligent Misrepresentation; (2) Fraud; (3) Breach of Contract; and (4) Declaratory Relief.

Defendants ELLESTAD and VAIL demur to all causes of action pursuant to CCP §430.10(e) and (f).

Uncertainty

Demurrers on grounds of uncertainty are strictly construed and will not be sustained unless the complaint is so bad that the defendant cannot reasonably respond. (Khoury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.) Here, the TAC is not so uncertain that Defendant(s) cannot reasonably respond. The demurrer is not sustained on the basis of uncertainty.

First and Second Causes of Action – Negligent Misrepresentation and Fraud

“Negligent misrepresentation is a form of deceit, the elements of which consist of (1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5) damages.” (Fox v. Pollack (1986) 181 Cal.App.3d 954, 962.) “The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

Whether intentional or negligent in nature, Plaintiff must allege sufficient facts to maintain a fraud claim. Moreover, Plaintiff must plead allegations that meet the heightened pleading requirements for fraud claims. Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Childrens Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Fraud must be pleaded with specificity rather than with general and conclusory allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said, or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

The demurrer to the first and second causes of action are overruled. Plaintiff has alleged sufficient facts to withstand demurrer. (See TAC ¶¶ 10-25.) The arguments raised by Defendants in the demurrer involve factual determinations inappropriately decided at this stage in the litigation. Moreover, as indicated above, the Court may only consider the allegations contained in the four walls of the TAC and matters that are the subject of proper judicial notice. The Court is without jurisdiction to weigh evidence at this time.

Third Cause of Action – Breach of Contract (as to Defendant ELLESTAD)

Defendants argue that Plaintiff’s third cause of action for breach of contract is subject to demurrer because Plaintiff does not allege a breach of any agreement between Plaintiff and Defendant Ellestad.

In Opposition, Plaintiff argues that Ellestad can be held liable for AgriTech’s breach(es) of contract because AgriTech is Ellestad’s alter ego.

To state a claim for breach of contract, a Plaintiff must allege sufficient facts to establish: (1) a contract between the parties; (2) plaintiff’s performance of excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff from the breach. (See, e.g., Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

Ordinarily, a corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. [Citations.]” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) “In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Id.) Among the factors to be considered in applying the doctrine are commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other. (Id., at 538-539.) Other factors include inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers. (Id., at 539.) No one characteristic governs. The courts must look at the totality of the circumstances to determine whether the doctrine should be applied. Alter ego is an extreme remedy which is sparingly used. (Id.)

Plaintiff’s TAC contains sufficient factual allegations to support a finding that AgriTech is the alter ego of Ellestad for purposes of surviving demurrer. Plaintiff alleges “that Mr. Ellestad, AgriTech’s sole director, Chief Executive Officer, and larges shareholder, dominated, influenced, and controlled the business, property, and affairs of AgriTech, and that, at all times mentioned herein, there existed and now exists such a unity of interest and ownership between Mr. Ellestad and AgriTech such that the claimed separateness of AgriTech as a corporate entity no longer exists…. [¶] Mr. Ellestad failed to observe corporate formalities including by failing to hold directors’ meetings or to keep minutes of those meetings. And, in fact, despite multiple requests, neither Mr. Ellestad or AgriTech has ever provided Alexandria or its board observer with notice of a board meeting or with any materials presented to AgriTech’s board…. Mr. Ellestad has made personal loans to AgriTech to cover basic operating expenses including payroll….” (TAC ¶¶50-52.)

Where Defendants do not dispute that Plaintiff has alleged a sufficient breach of contract claim against AgriTech, and Plaintiff has sufficiently alleged that AgriTech is the alter ego of Ellestad, the demurrer to the third cause of action is overruled.

Fourth Cause of Action – Declaratory Relief

Here, Plaintiff’s declaratory relief claim seeks a judicial determination that AgriTech is the alter ego entity of Ellestad. As indicated above, the Court finds that Plaintiff has sufficiently alleged the existence of an alter ego relationship between AgriTech and Ellestad for the purposes of surviving demurrer. The demurrer to the fourth cause of action is overruled.

Motion to Strike

A motion to strike lies either when (1) there is “irrelevant, false or improper matter inserted in any pleading”; or (2) to strike any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule or order of court.” (CCP §436.)

The Court cannot make factual determinations in response to a Motion to Strike. (See Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967.) The Court must accept the factual allegations set forth in the TAC as true at this stage in the litigation. Defendants improperly ask the Court to review documents outside of the four walls of the operative pleading—which is beyond the scope of a motion to strike. The motion to strike is denied.

Defendants’ Motion to File Records Under Seal

Defendants move to seal Exhibit A to Defendants’ Request for Judicial Notice in Support of Defendants’ Demurrer to Plaintiff’s Third Amended Complaint and Motion to Strike.

As of December 4, 2019, no Opposition has been filed or lodged with the Court.

“The 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).) Financial information involving confidential matters relating to the business operations of a party may be sealed where public revelation of the information would interfere with the party’s ability to effectively compete in the marketplace and there is a substantial probability that their revelation would prejudice the foregoing legitimate interests of the party. (Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1285-1286.)

The Moving Papers include the Declaration of Jake Gilbert, attorney of record for the Moving Parties. Mr. Gilbert states that the there is an overriding interest to protect the company’s confidential business and proprietary information. The motion to seal is granted. The Court finds that the parties’ interest in the confidentiality of their business information, overcomes the right of public access to court records. This overriding interest supports sealing the records. The parties’ confidential information will be prejudiced if the records are not sealed. This order is narrowly tailored, and no less restrictive means exist to protect the parties’ confidential information.