This case was last updated from Los Angeles County Superior Courts on 05/05/2020 at 07:24:57 (UTC).

AVISON TECHNOLOGY CO VS ZACK YUE SHEN

Case Summary

On 05/02/2018 AVISON TECHNOLOGY CO filed a Contract - Business lawsuit against ZACK YUE SHEN. This case was filed in Los Angeles County Superior Courts, Pomona Courthouse South located in Los Angeles, California. The Judges overseeing this case are OKI, DAN THOMAS, DAN THOMAS OKI and GLORIA WHITE-BROWN. The case status is Disposed - Dismissed.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****0262

  • Filing Date:

    05/02/2018

  • Case Status:

    Disposed - Dismissed

  • Case Type:

    Contract - Business

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Pomona Courthouse South

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

OKI, DAN THOMAS

DAN THOMAS OKI

GLORIA WHITE-BROWN

 

Party Details

Plaintiff

AVISON TECHNOLOGY CO

Defendants

TMAX DIGITAL INC

WNG JING ZHI

SHREN ZACK YUE

SHEN ZACK YUE

Attorney/Law Firm Details

Plaintiff Attorneys

ALTAGEN ROBERT S.

ALTAGEN ROBERT STEVEN

Defendant Attorneys

EILROD ANTHONY J.

WALLIS JENIFER C.

WALLIS JENIFER

 

Court Documents

Notice - NOTICE NOTICE OF ORDER TO SHOW CAUSE AND COURT VACATING TRIAL AND FINAL STATUS CONFERENCE

4/28/2020: Notice - NOTICE NOTICE OF ORDER TO SHOW CAUSE AND COURT VACATING TRIAL AND FINAL STATUS CONFERENCE

Minute Order - MINUTE ORDER (CASE MANAGEMENT CONFERENCE)

3/12/2020: Minute Order - MINUTE ORDER (CASE MANAGEMENT CONFERENCE)

Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER (MOTION FOR SANCTIONS))

12/6/2019: Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER (MOTION FOR SANCTIONS))

Minute Order - MINUTE ORDER (HEARING ON MOTION FOR SANCTIONS; CASE MANAGEMENT CONFERENCE)

12/4/2019: Minute Order - MINUTE ORDER (HEARING ON MOTION FOR SANCTIONS; CASE MANAGEMENT CONFERENCE)

Order - ORDER TENTATIVE RULING

10/31/2019: Order - ORDER TENTATIVE RULING

Declaration - DECLARATION DECLARATION OF JENIFER WALLIS IN SUPPORT OF EX PARTE APPLICATION ORDER SHORTENING TIME FOR HEARING ON MOTION TO SET ASIDE DEFAULT AND TO CONTINUE TRIAL DATE

8/15/2019: Declaration - DECLARATION DECLARATION OF JENIFER WALLIS IN SUPPORT OF EX PARTE APPLICATION ORDER SHORTENING TIME FOR HEARING ON MOTION TO SET ASIDE DEFAULT AND TO CONTINUE TRIAL DATE

Declaration - DECLARATION DECLARATION OF DAVID JI

7/25/2019: Declaration - DECLARATION DECLARATION OF DAVID JI

Proof of Service (not Summons and Complaint)

6/19/2019: Proof of Service (not Summons and Complaint)

Minute Order - MINUTE ORDER (HEARING ON EX PARTE APPLICATION FOR ORDER SHORTENING TIME TO ...)

6/25/2019: Minute Order - MINUTE ORDER (HEARING ON EX PARTE APPLICATION FOR ORDER SHORTENING TIME TO ...)

Minute Order - Minute order entered: 2018-09-26 00:00:00

9/26/2018: Minute Order - Minute order entered: 2018-09-26 00:00:00

Separate Statement

1/9/2019: Separate Statement

Separate Statement

1/9/2019: Separate Statement

Notice Re: Continuance of Hearing and Order

1/11/2019: Notice Re: Continuance of Hearing and Order

Certificate of Mailing for - Certificate of Mailing for Minute Order (Hearing - Other Mediation) of 02/13/2019

2/13/2019: Certificate of Mailing for - Certificate of Mailing for Minute Order (Hearing - Other Mediation) of 02/13/2019

Case Management Statement -

9/11/2018: Case Management Statement -

Notice of Case Reassignment and Order for Plaintiff to Give Notice

12/19/2018: Notice of Case Reassignment and Order for Plaintiff to Give Notice

Case Management Statement -

9/17/2018: Case Management Statement -

Request for Entry of Default / Judgment -

7/2/2018: Request for Entry of Default / Judgment -

89 More Documents Available

 

Docket Entries

  • 05/04/2020
  • Docketat 08:30 AM in Department J, Gloria White-Brown, Presiding; Final Status Conference - Not Held - Advanced and Vacated

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  • 04/29/2020
  • DocketRequest for Dismissal; Filed by AVISON TECHNOLOGY CO (Plaintiff)

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  • 04/28/2020
  • DocketNotice (Notice of Order to Show Cause and Court Vacating Trial and Final Status Conference); Filed by AVISON TECHNOLOGY CO (Plaintiff)

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  • 03/26/2020
  • Docketat 11:40 AM in Department J, Gloria White-Brown, Presiding; Court Order

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  • 03/26/2020
  • DocketCertificate of Mailing for ((Court Order) of 03/26/2020); Filed by Clerk

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  • 03/26/2020
  • DocketMinute Order ( (Court Order)); Filed by Clerk

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  • 03/12/2020
  • Docketat 08:30 AM in Department J, Gloria White-Brown, Presiding; Case Management Conference - Held

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  • 03/12/2020
  • DocketMinute Order ( (Case Management Conference)); Filed by Clerk

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  • 01/29/2020
  • Docketat 08:30 AM in Department J, Gloria White-Brown, Presiding; Hearing on Demurrer - with Motion to Strike (CCP 430.10) - Held

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  • 01/29/2020
  • DocketOrder (Tentative Ruling); Filed by Clerk

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107 More Docket Entries
  • 07/02/2018
  • DocketDefault Entered; Filed by AVISON TECHNOLOGY CO (Plaintiff)

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  • 06/27/2018
  • DocketOSC-Failure to File Proof of Serv; Filed by Clerk

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  • 06/22/2018
  • DocketProof of Service (not Summons and Complaint); Filed by Plaintiff

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  • 06/22/2018
  • DocketProof of Service (not Summons and Complaint); Filed by Plaintiff

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  • 06/22/2018
  • DocketAnswer; Filed by TMAX DIGITAL INC (Defendant)

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  • 05/03/2018
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 05/02/2018
  • DocketComplaint; Filed by AVISON TECHNOLOGY CO (Plaintiff)

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  • 05/02/2018
  • DocketCivil Case Cover Sheet

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  • 05/02/2018
  • DocketSummons (on Complaint)

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  • 05/02/2018
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by Clerk

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Tentative Rulings

Case Number: KC070262    Hearing Date: January 29, 2020    Dept: J

HEARING DATE: Wednesday, January 29, 2020

NOTICE: OK

RE: Avision Technology Co. v. Shen, et al. (KC070262)

______________________________________________________________________________

 

1. Defendants Tmax Digital’s and Zack Yue Sen (erroneously sued herein as Zack Yue

Shen)’s DEMURRER TO FIRST AMENDED COMPLAINT

Responding Party: Plaintiff, Avision Technology Co.

2. Defendants Tmax Digital’s and Zack Yue Sen (erroneously sued herein as Zack Yue

Shen)’s MOTION TO STRIKE FIRST AMENDED COMPLAINT

Responding Party: Plaintiff, Avision Technology Co.

Tentative Ruling

1. Defendants Tmax Digital’s and Zack Yue Sen (erroneously sued herein as Zack Yue Shen)’s Demurrer to First Amended Complaint is SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

2. Defendants Tmax Digital’s and Zack Yue Sen (erroneously sued herein as Zack Yue Shen)’s Motion to Strike First Amended Complaint is DENIED as MOOT.

Background

Plaintiff Avision Technology Co. (“Plaintiff”) alleges that its former employees, Zack Yue Sen (erroneously sued herein as Zack Yue Shen) (“Sen”) and Jing Zhi Wang (“Wang”), conspired with Tmax Digital, Inc. (“Tmax”) and diverted corporate funds to Tmax.

On September 26, 2018, Plaintiff dismissed Wang, without prejudice. On August 1, 2019, the court granted Sen’s motion to set aside/vacate default. On November 13, 2019, Plaintiff filed a First Amended Complaint (“FAC”), asserting causes of action against Defendants Sen, Wang, Tmax and Does 1-50 for:

  1. Breach of Fiduciary Duties (v. Wang only)

  2. Negligence (v. Wang only)

  3. Conversion

  4. Accounting of Funds and Damages

  5. Conspiracy

  6. Violation of Business & Professions Code Section 17200 et seq – Unfair Business Practices

A Case Management Conference is set for March 12, 2020. The Final Status Conference is set for May 4, 2020. Trial is set for May 12, 2020.

1. Demurrer

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

A demurrer for uncertainty, moreover, will be sustained only where the complaint is so bad that the defendant cannot reasonably respond. (CCP § 430.10(f); see Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)

Discussion

Tmax and Sen demur, per CCP § 430.10, to the third through sixth causes of action in the FAC, on the basis that they each fail to state facts sufficient to constitute causes of action.

At the outset, the court notes that the fourth cause of action is directed against Tmax only.

Alter Ego

“Under the alter ego doctrine,. . . when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) “The essence of the alter ego doctrine is not that the individual shareholder becomes the corporation, but that the individual shareholder is liable for the actions of the corporation.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.) “To recover on an alter ego theory, a plaintiff need not use the words ‘alter ego,’ but must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.” (Id. [emphasis added].)

Here, Plaintiff merely cites conclusions of alter ego, with no supporting facts. In fact, Plaintiff expressly pleads that “Sen was an employee of Tmax Digital, Inc.” and that all alleged transfers were transferred “to his employer, Tmax.” (FAC, ¶¶2 and 34.)

Additional deficiencies with the FAC are addressed below:

Third Cause of Action (i.e., Conversion)

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Burlesci v. Petersen (1991) 68 Cal.App.4th 1062, 1066.)

“There can be no conversion where an owner either expressly or impliedly assents to or ratifies the taking, use or disposition of his property” (Farrington v. A. Teichert & Son (1943) 59 Cal.App.2d 468, 474.) Also, “the knowledge of a corporate officer within the scope of his employment is the knowledge of the corporation.” (Bank of New York v. Fremont General Corporation (9th Cir. 2008) 523 F.3d 902, 911.)

In Bank of New York, plaintiff bank sued Fremont General Corporation (“Fremont General”), the ultimate corporate parent of Fremont Indemnity Company (“Fremont Indemnity”) and Industrial Indemnity Company (“Industrial Indemnity”), for damages allegedly incurred as a result of Fremont General’s withdrawal of $14 million from custodial accounts that Fremont Indemnity maintained at plaintiff bank. Fremont General’s withdrawals violated New York insurance law and the “custodian agreement” that Fremont Indemnity signed with plaintiff bank. Fremont General managed Fremont Indemnity’s investments per a written services and management agreement. The custodian agreement named plaintiff bank as the custodian and barred plaintiff bank from releasing funds without a written request from Fremont Indemnity and written approval from the Superintendent of Insurance of the State of New York (“Superintendent”).

New York insurance law permits insurance carriers to withdraw from custodial accounts interest earned on the deposited principal, but not the principal itself. Fremont General, acting as Fremont Indemnity’s investment manager, initially deposited in the custodial accounts interest-bearing securities that made no periodic principal repayments before seeking and obtaining approval from the New York Insurance Department to substitute Government National Mortgage Association (“GNMA”) securities in place of the interest-bearing securities. Since GNMA securities made periodic payments or principal along with payments of interest, the New York Insurance Department initially found them unacceptable trust deposit securities for Fremont Indemnity’s custodial account. In October 2000, Fremont General replaced the existing bonds in the custodial accounts with GNMA securities with a principal value of approximately $14 million. Before May 2002, all returns on investment in the custodial accounts were interest only. The first periodic credit including partial repayment of principal occurred in May 2002. In September 2000, Fremont General gave plaintiff bank a standing order to transfer all cash in the custodial account to Fremont Indemnity’s non-custodial account at J.P. Morgan Chase. Plaintiff Bank transferred the May 2002 principal payment out of the custodial account pursuant to that order, and continued to do so through September. Between May 2002 and April 2003, plaintiff bank transferred approximately $14 million from the custodial accounts to the J.P. Morgan Chase account. Plaintiff bank entered into a settlement agreement in response to the New York Insurance Department’s repeated demands on plaintiff bank to replace the $14 million in principal, and the Superintendent assigned his claims against Fremont General to plaintiff bank as part of the settlement.

According to plaintiff bank, Fremont General intentionally interfered with the custodian agreement between Fremont Indemnity and plaintiff bank and converted the funds in the custodial accounts. The United States District Court for the Central District of California entered judgment for Fremont General following bench trial and plaintiff bank appealed. The Ninth Circuit affirmed the district court’s judgment in favor of Fremont General on the conversion claim: “In the present case, the district court found that BONY knew that the money it was transferring to Fremont Indemnity’s separate account was principal. ‘Beginning in May 2002, the GNMAs began making unscheduled principal reduction payments. Various documents regarding the transfer of principal approved by various [BONY] account supervisors. . . indicate that [BONY] was aware that the GNMAs were generating principal reduction payments, but [BONY] nonetheless transferred those funds to the J.P. Morgan Chase account. . .’ This factual finding establishes that BONY consented to the transfer, despite knowing the transfer required written approval from the Superintendent. Under Farrington, this consent forecloses BONY’s conversion claim, unless BONY can demonstrate that the district court’s finding is clearly erroneous. BONY has not carried this heavy burden.” (Id. at 914-915.)

Here, Plaintiff alleged as follows: that Sen “was signatory to multiple corporate bank accounts belonging to plaintiff;” that Sen “was never an employee, officer, interest holder, or authorized agent of plaintiff;” that Sen “was an employee of Tmax Digital, Inc.;” that Wang “was an officer of [Plaintiff] prior to June 25, 2015 and remained after as an officer of [Plaintiff] and a signatory to the various bank accounts;” that “Wang, as a corporate officer, abused plaintiff’s trust by. . . siphoning monies to the prior owner of plaintiff. . .,” that “Wang engaged Sen, who is an employee of Plaintiff’s customer, Tmax to serve as a signatory to plaintiff’s bank account and, in concert. . . diverted massive sums of money from Plaintiff’s account to Tmax;” and that Wang “breached all of her duties as an officer by. . . planted [sic] a customer’s (Tmax) employee, Zack to be a signatory to the bank accounts in furtherance to diversion of the funds;. . . [and] usurping corporate funds;” (FAC, ¶¶2, 3, 18, 19 and 24.) As its factual support for its conversion claim against Sen and Tmax, Plaintiff only cites Wang’s involvement and alleged direction for the transfer: “Wang had custody and control of Plaintiff’s books and bank accounts and had allowed Tmax employee, Sen to also maintain control of Plaintiff’s account” and “Wang wrongfully and without justification wired funds from Plaintiff’s account. . .[and] gave Sen signatory powers over plaintiff’s account to write checks to his employer, Tmax.” (Id., ¶¶33 and 34.)

The court notes that Plaintiff’s initial complaint alleged only that Sen and Wang transferred funds from Plaintiff’s accounts to Tmax’s accounts, and did not allege that such transfer was for Sen’s direct benefit. (Complaint, ¶¶19, 30 and 34.) The FAC, however, adds the unsupported allegation that “Sen wrote checks on plaintiff’s account to Tmax for his own direct benefit, and that of Tmax and of Wang, and not for any benefit or use to plaintiff.” (FAC, ¶34.) Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment. (See State of California ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402.) The court agrees that Plaintiff has failed to provide an explanation as to how Sen personally benefitted where the alleged transfer was always to Tmax.

Sen’s and Tmax’s demurrer to the third cause of action is SUSTAINED.

Fourth Cause of Action (i.e., Accounting)

 

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) “An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Ibid.)

Plaintiff does not oppose the demurrer as to this cause of action, which is directed only against Tmax. Here, Plaintiff has alleged “the right to recover a sum certain;” specifically, Plaintiff alleged that “[i]t was uncovered in February 2018, that since June 15, 2015, there were $4,814,943.00 in wired funds and cashed checks written to unknown entities including Avision Technology (Changzhou) Co., Ltd., and Tmax from the Hanmi Bank a/c #7288, from the Hanmi Bank A/c #7466.” (FAC, ¶17.)

Tmax’s demurrer to the fourth cause of action, then, is SUSTAINED.

Fifth Cause of Action (i.e., Conspiracy)

 

“Civil conspiracy is not an independent tort. Rather, it is a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823 [internal citations and quotations omitted].) “It is a general and well-settled principle of law that, where two or more persons are sued for a civil wrong, it is the civil wrong resulting in damage, and not the conspiracy, which constitutes the cause of action.” (Mox, Inc. v. Woods (1927) 202 Cal. 675, 677.) “In order to state a cause of action based upon a conspiracy theory the plaintiff must allege the formation and operation of the conspiracy, the wrongful act or acts done pursuant to it, and the damage resulting from such acts. In making such allegations bare legal conclusions, inferences, generalities, presumptions, and conclusions are insufficient.” (State of California ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 419 [internal citations omitted].)

Plaintiff has not sufficiently pled the underlying cause of action for conversion to support liability based upon a conspiracy theory.

Sen’s and Tmax’s demurrer to the fifth cause of action is SUSTAINED.

Sixth Cause of Action (i.e., Unfair Business Practices)

 

The purpose of the unfair competition law (“UCL”) (Business & Professions Code § 17200 et seq.) “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 110.) The elements required to state a cause of action for violation of Business & Professions Code section 17200 are (1) a business practice, (2) that is unfair, unlawful or fraudulent, and (3) an authorized remedy. (Business and Professions Code § 17200). “Because the statute is framed in the disjunctive, a business practice need only meet one of the three criteria to be considered unfair competition.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471.)

Section 17200's “unlawful” prong “borrows violations of other laws ... and makes those unlawful practices actionable under the UCL.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.) “[V]irtually any law or regulation—federal or state, statutory or common law—can serve as [a] predicate for a ... [section] 17200 ‘unlawful’ violation.’” (Id.)

Unfair acts among competitors means conduct that threatens an incipient violation of an antitrust law, or violates the spirit or policy of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition. (Ibid.) Fraudulent acts are ones where members of the public are likely to be deceived. (Ibid.)

Sen’s unfair business practice cause of action relies on the conversion cause of action, which has not been sufficiently pled, for the reasons set forth above. Sen’s and Tmax’s demurrer to the sixth cause of action is SUSTAINED.

2. Motion to Strike

Based upon the ruling made on the demurrer, the motion to strike is DENIED as MOOT.

Case Number: KC070262    Hearing Date: December 04, 2019    Dept: J

HEARING DATE: Wednesday, December 4, 2019

NOTICE: OK

RE: Avision Technology Co. v. Shen, et al. (KC070262)

______________________________________________________________________________

 

Defendants Tmax Digital’s and Zack Yue Sen (erroneously sued herein as Zack Yue

Shen)’s MOTION FOR SANCTIONS

Responding Party: Plaintiff, Avision Technology Co.

Tentative Ruling

Defendants Tmax Digital’s and Zack Yue Sen (erroneously sued herein as Zack Yue Shen)’s Motion for Sanctions is DENIED.

Background

Plaintiff Avision Technology Co. (“Plaintiff”) alleges that its former employees, Zack Yue Sen (erroneously sued herein as Zack Yue Shen) (“Sen”) and Jing Zhi Wang (“Wang”), conspired with Tmax Digital, Inc. (“Tmax”) and diverted corporate funds to Tmax.

On September 26, 2018, Plaintiff dismissed Wang, without prejudice. On August 1, 2019, the court granted Sen’s motion to set aside/vacate default. On November 13, 2019, Plaintiff filed a First Amended Complaint, asserting causes of action against Defendants Sen, Wang, Tmax and Does 1-50 for:

  1. Breach of Fiduciary Duties

  2. Negligence

  3. Conversion

  4. Accounting of Funds and Damages

  5. Conspiracy

  6. Violation of Business & Professions Code Section 17200 et seq – Unfair Business Practices

A Case Management Conference is set for December 4, 2019. The Final Status Conference is set for May 4, 2020. Trial is set for May 12, 2020.

Legal Standard

CCP § 128.5(a) provides that “[a] trial court may order a party, the party’s attorney, or both, to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.” “’Actions or tactics’ include, but are not limited to, the making or opposing of motions or the filing and service of a complaint, cross-complaint, answer, or other responsive pleading.” (CCP § 128.5(b)(1).) CCP § 128.5 does not apply to discovery disclosures and motions. (ccp § 128.5(e).) “‘Frivolous’ means totally and completely without merit or for the sole purpose of harassing an opposing party.” (CCP § 128.5(b)(2).) The motion must be made separately from any other motion and it must specifically describe the sanctionable conduct. (CCP § 128.5(f)(1)(A).)

There is a 21-day safe harbor period for sanctions when the motion is based on the making or a written motion, or the filing or service of a complaint, cross-complaint, answer, or other responsive pleading that can be withdrawn or appropriately corrected. (CCP § 128.5(f)(1)(B).)

The legislative history of the most recent (2017) statutory amendments reflects that one of the purposes of the amendments was to clarify that the standard applied in CCP § 128.5 is a “subjective bad faith standard.” “[A] showing that a party’s action or tactic is totally and completely without merit does not settle the issue of whether that action or tactic was in bad faith. Such a showing is certainly evidence that the action is brought in bad faith, because a trial court is entitled to infer from the utter lack of merit that the party knew that it lacked such merit, and yet continued to pursue the action for some ulterior motive. However, the trial court may not be willing to draw that inference if it is convinced that, despite the complete lack of merit, the party was acting in the good faith (albeit erroneous and even unreasonable) belief that the action was meritorious. Thus, the inference of bad faith is one which the trial court may make, but it is not mandatory that it do so.” (Summers v. City of Cathedral City (1990) 225 Cal. App. 3d 1047, 1073.)

Discussion

Tmax and Sen[1] move the court for sanctions on the basis that (1) Plaintiff’s refusal to set aside the default entered against Sen and (2) Plaintiff’s improper service of the summons, complaint, and request for entry of default against Sen constituted bad faith litigation tactics.

At the outset, the court notes that, while reference is repeatedly made in the motion to the “Wallis Decl.,” the court is not in receipt of any such declaration filed in connection with this motion. The court has considered the totality of the papers filed in connection with this motion, including Exhibits A-C improperly attached to Sen’s declaration, and believes that a substantive ruling may nevertheless be made in the absence of Wallis’ declaration.

To the extent the motion is based on Tmax’s and Sen’s assertion that Plaintiff’s service of the summons, complaint, and request for entry of default against Sen constituted bad faith litigation tactics, the court determines that Tmax and Sen have failed to show that Plaintiff’s service of the summons, complaint, and request for entry of default was “totally and completely without merit or for the sole purpose of harassing an opposing party” or “solely intended to cause unnecessary delay.” The court notes that on June 22, 2018, Plaintiff filed two proofs of service, which reflected that on May 22, 2018 both Tmax and Sen had purportedly been substitute-served at “4401 Eucalyptus Ave #120, Chino, CA 91710.” The proof of service as to Sen, moreover, was accompanied by a Declaration of Diligence which reflected that three previous attempts to personally serve Sen at the aforesaid address were made, and that the process server was advised by an “employee,” on two of these occasions, that Sen was simply “[n]ot in (business),” not that Sen did not work there. Tmax did not challenge service and subsequently filed an answer on June 22, 2018, which suggests to the court that the aforesaid address was, in fact, a valid address for Tmax. Tmax and Sen have not provided any evidence reflecting that Plaintiff and/or Plaintiff’s counsel were aware or should have been aware that the foregoing address was not valid for Sen at the time substitute service was made.

To the extent the motion is based on Tmax’s and Sen’s assertion that Plaintiff’s refusal to set aside Sen’s default constituted a bad faith litigation tactic, the court determines that Tmax and Sen have likewise failed to show that said refusal was “totally and completely without merit or for the sole purpose of harassing an opposing party” or “solely intended to cause unnecessary delay.” Again, the proof of service filed on June 22, 2018 as to Sen indicates that three previous attempts to personally serve Sen at the aforesaid address were made, and that the process server was advised by an “employee,” on two of these occasions, that Sen was simply “[n]ot in (business),” not that Sen did not work there. Although Sen’s counsel subsequently furnished a declaration to Plaintiff’s counsel from Sen wherein Sen advised that he was “a former employee of TMAX DIGITAL, INC.” that he “stopped working at TMAX, Digital, Inc. in May 2017,” that “[a]t that time, TMAX’s offices were located at 4401 Eucalyptus Avenue #120 Chino, CA 91710” and that he “ha[s] been informed that Tmax has since moved its offices but [he] ha[s] neither been to the former Chino office nor its new office since [he] left the company in May 2017” (Shen Decl., ¶¶ 1-2), Plaintiff and/or Plaintiff’s counsel’s decision not to stipulate to set aside Sen’s default cannot be said to constitute “subjective bad faith,” especially when viewed in the context of the Declaration of Diligence.

Accordingly, the motion is DENIED.


[1] It is unclear to the court why Tmax is a moving party, inasmuch as the motion pertains to service/default issues regarding Sen only.

Case Number: KC070262    Hearing Date: October 31, 2019    Dept: J

HEARING DATE: Thursday, October 31, 2019

NOTICE: OK[1]

RE: Avision Technology Co. v. Shen, et al. (KC070262)

______________________________________________________________________________

 

Defendant Zack Yue Sen (erroneously sued herein as Zack Yue Shen)’s DEMURRER TO

COMPLAINT

Responding Party: Plaintiff, Avision Technology Co.

Tentative Ruling

Defendant Zack Yue Sen (erroneously sued herein as Zack Yue Shen)’s Demurrer to Complaint is SUSTAINED in part (i.e., as to the fourth cause of action) and otherwise OVERRULED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested, and will require an offer of proof if so.

Background

Plaintiff Avision Technology Co. (“Plaintiff”) alleges that its former employees, Zack Yue Sen (erroneously sued herein as Zack Yue Shen) (“Sen”) and Jing Zhi Wang (“Wang”), conspired with Tmax Digital, Inc. (“Tmax”) and diverted corporate funds to Tmax. On May 2, 2018, Plaintiff filed a complaint, asserting causes of action against Defendants Sen, Wang, Tmax and Does 1-50 for:

  1. Breach of Fiduciary Duties

  2. Negligence

  3. Conversion

  4. Accounting of Funds and Damages

  5. Conspiracy

  6. Violation of Business & Professions Code Section 17200 et seq – Unfair Business Practices

On September 26, 2018, Plaintiff dismissed Wang, without prejudice.

A Case Management Conference is set for October 31, 2019. The Final Status Conference is set for May 4, 2020. Trial is set for May 12, 2020.

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

Discussion

Sen demurs, per CCP § 430.10(e), to the third through sixth causes of action in Plaintiff’s complaint, on the basis that they each fail to state facts sufficient to constitute causes of action.

Request for Judicial Notice

The court DENIES Sen’s Request for Judicial Notice submitted concurrently with his reply brief.

Third Cause of Action (i.e., Conversion)

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Burlesci v. Petersen (1991) 68 Cal.App.4th 1062, 1066.)

“Conversion is a strict liability tort. The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendant’s good faith, lack of knowledge, and motive are ordinarily immaterial.” (Ibid.) Sen’s contention that Plaintiff failed to allege that Sen had any intent to convert Plaintiff’s alleged property, then, is immaterial.

Sen cites the proposition that “there can be no conversion where an owner either expressly or impliedly assents to or ratifies the taking, use or disposition of his property” (Farrington v. A. Teichert & Son (1943) 59 Cal.App.2d 468, 474.) Co-Defendant Wang, however, is alleged to be an officer of Plaintiff, not the owner of the property converted.

Sen, in his supplemental briefing, cites the proposition that “the knowledge of a corporate officer within the scope of his employment is the knowledge of the corporation.” (Supplemental Briefing, 2:1-3, quoting Bank of New York v. Fremont General Corporation (9th Cir. 2008) 523 F.3d 902, 911.) In Bank of New York, plaintiff bank sued Fremont General Corporation (“Fremont General”), the ultimate corporate parent of Fremont Indemnity Company (“Fremont Indemnity”) and Industrial Indemnity Company (“Industrial Indemnity”), for damages allegedly incurred as a result of Fremont General’s withdrawal of $14 million from custodial accounts that Fremont Indemnity maintained at plaintiff bank. Fremont General’s withdrawals violated New York insurance law and the “custodian agreement” that Fremont Indemnity signed with plaintiff bank. Fremont General managed Fremont Indemnity’s investments per a written services and management agreement. The custodian agreement named plaintiff bank as the custodian and barred plaintiff bank from releasing funds without a written request from Fremont Indemnity and written approval from the Superintendent of Insurance of the State of New York (“Superintendent”).

New York insurance law permits insurance carriers to withdraw from custodial accounts interest earned on the deposited principal, but not the principal itself. Fremont General, acting as Fremont Indemnity’s investment manager, initially deposited in the custodial accounts interest-bearing securities that made no periodic principal repayments before seeking and obtaining approval from the New York Insurance Department to substitute Government National Mortgage Association (“GNMA”) securities in place of the interest-bearing securities. Since GNMS securities make periodic payments or principal along with payments of interest, the New York Insurance Department initially found them unacceptable trust deposit securities for Fremont Indemnity’s custodial account. In October 2000, Fremont General replaced the existing bonds in the custodial accounts with GNMA securities with a principal value of approximately $14 million. Before May 2002, all returns on investment in the custodial accounts were interest only. The first periodic credit including partial repayment of principal occurred in May 2002. In September 2000, Fremont General gave plaintiff bank a standing order to transfer all cash in the custodial account to Fremont Indemnity’s non-custodial account at J.P. Morgan Chase. Plaintiff Bank transferred the May 2002 principal payment out of the custodial account pursuant to that order, and continued to do so through September. Between May 2002 and April 2003, plaintiff bank transferred approximately $14 million from the custodial accounts to the J.P. Morgan Chase account. Plaintiff bank entered into a settlement agreement in response to the New York Insurance Department’s repeated demands on plaintiff bank to replace the $14 million in principal, and the Superintendent assigned his claims against Fremont General to plaintiff bank as part of the settlement.

According to plaintiff bank, Fremont General intentionally interfered with the custodian agreement between Fremont Indemnity and plaintiff bank and converted the funds in the custodial accounts. The United States District Court for the Central District of California entered judgment for Fremont General following bench trial and plaintiff bank appealed. The Ninth Circuit affirmed the district court’s judgment in favor of Fremont General on the conversion claim: “In the present case, the district court found that BONY knew that the money it was transferring to Fremont Indemnity’s separate account was principal. ‘Beginning in May 2002, the GNMAs began making unscheduled principal reduction payments. Various documents regarding the transfer of principal approved by various [BONY] account supervisors. . . indicate that [BONY] was aware that the GNMAs were generating principal reduction payments, but [BONY] nonetheless transferred those funds to the J.P. Morgan Chase account. . .’ This factual finding establishes that BONY consented to the transfer, despite knowing the transfer required written approval from the Superintendent. Under Farrington, this consent forecloses BONY’s conversion claim, unless BONY can demonstrate that the district court’s finding is clearly erroneous. BONY has not carried this heavy burden.” (Id. at 914-915.)

The Bank of New York is distinguishable in that it did not involve an alleged conversion of funds by a corporate officer for a corporate officer’s personal purposes. The alleged conversion of corporate funds by a corporate officer cannot be said to be “within the scope” of a corporate officer’s employment.

Sen’s demurrer to the third cause of action is OVERRULED.

Fourth Cause of Action (i.e., Accounting)

 

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) “An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Ibid.)

Here, Plaintiff “alleges the right to recover a sum certain;” specifically, Plaintiff has alleged that “[i]t was uncovered in February 2018, that since June 15, 2015, there were $3,144,153.00 that were wired and checks written to unknown entities including Avision Technology (Changzhou) Co., Ltd., and Tmax from the Hanmi Bank a/c #7288, and $2,337,610.00 from the Hanmi Bank A/c #7466.” (Complaint, ¶17.)

Sen’s demurrer to the fourth cause of action, then, is SUSTAINED.

Fifth Cause of Action (i.e., Conspiracy)

 

“Civil conspiracy is not an independent tort. Rather, it is a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823 [internal citations and quotations omitted].) “It is a general and well-settled principle of law that, where two or more persons are sued for a civil wrong, it is the civil wrong resulting in damage, and not the conspiracy, which constitutes the cause of action.” (Mox, Inc. v. Woods (1927) 202 Cal. 675, 677.) “In order to state a cause of action based upon a conspiracy theory the plaintiff must allege the formation and operation of the conspiracy, the wrongful act or acts done pursuant to it, and the damage resulting from such acts. In making such allegations bare legal conclusions, inferences, generalities, presumptions, and conclusions are insufficient.” (State of California ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 419 [internal citations omitted].)

Here, the complaint alleges the formation and operation of a conspiracy. (Complaint, ¶44.) Further, Plaintiff has sufficiently pled the underlying cause of action for conversion to support liability based upon a conspiracy theory.

Sen’s demurrer to the fifth cause of action is OVERRULED.

Sixth Cause of Action (i.e., Unfair Business Practices)

 

The purpose of the unfair competition law (“UCL”) (Business & Professions Code § 17200 et seq.) “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 110.) The elements required to state a cause of action for violation of Business & Professions Code section 17200 are (1) a business practice, (2) that is unfair, unlawful or fraudulent, and (3) an authorized remedy. (Business and Professions Code § 17200). “Because the statute is framed in the disjunctive, a business practice need only meet one of the three criteria to be considered unfair competition.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471.)

Section 17200's “unlawful” prong “borrows violations of other laws ... and makes those unlawful practices actionable under the UCL.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.) “[V]irtually any law or regulation—federal or state, statutory or common law—can serve as [a] predicate for a ... [section] 17200 ‘unlawful’ violation.’” (Id.)

Unfair acts among competitors means conduct that threatens an incipient violation of an antitrust law, or violates the spirit or policy of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition. (Ibid.) Fraudulent acts are ones where members of the public are likely to be deceived. (Ibid.)

Sen’s unfair business practice cause of action relies on the conversion cause of action, which has been sufficiently pled, for the reasons set forth above. Sen’s demurrer to the sixth cause of action is OVERRULED.   

[1] The demurrer was filed August 21, 2019 and originally set for hearing on September 25, 2019. On September 23, 2019, a “Stipulation and Order to Continue Hearing on Defendant Zack Yue Sen’s Demurrer to Plaintiff Avision Technology Co.’s Complaint” was filed, wherein the hearing was continued to October 9, 2019. On October 9, 2019, the court continued the hearing, on its own motion, to October 31, 2019. The October 9, 2019 minute order states, “[t]he court will allow further briefing by counsel. Defendant to submit further briefing by 10/16/19 and plaintiff to submit further briefing by 10/23/19.” Notice was waived. On October 15, 2019, Sen filed and mail-served his supplemental brief. No further briefing has been filed by Plaintiff, to date (i.e., as of October 24, 2019, 1:57 p.m.)