Tentative Rulings

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Case Number: ****6021 Hearing Date: September 17, 2021 Dept: 37

HEARING DATE: September 17, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: OK

MOTION: Motion for Protective Order

MOVING PARTIES: Cross-Defendants, Howard Misle and Meghan Konecne

OPPOSING PARTIES: Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

OPPOSITION: September 3, 2021

REPLY: September 7, 2021

TENTATIVE: Moving Defendants’ motion is denied. Both parties’ requests for sanctions are denied. Moving Defendants are to give notice.

MOTION: Demurrer to Second Amended Cross-Complaint, Motion to Strike Portions of Second Amended Cross-Complaint

MOVING PARTIES: Plaintiff/Cross-Defendant Genesis Media LLC and Cross-Defendants Howard Misle, Meghan Konecne and Belmeko, LLC

OPPOSING PARTIES: Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

OPPOSITION: July 6, 2021

REPLY: None as of July 15, 2021

TENTATIVE: The Genesis Parties’ demurrer is overruled. The Genesis Parties’ motion is denied. Ownzones and Goman are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman.

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.

On December 5, 2018, Ownzones and Goman (“Cross-Complainants”) filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.

On March 3, 2020, Ownzones and Goman filed amendments to their cross-complaint, naming Alex Nahai (“Nahai”) and Alex Nahai Consulting (“ANCS”) as roes 3 and 4. On December 28, 2020, Nahai an ANCS’ motion to strike these roe amendments was granted, and the roe amendments were stricken.

On November 6, 2020, Genesis’ motion for protective order regarding the deposition of Belmeko’s PMK was granted in part. Specifically, the court’s ruling was as follows:

Genesis’ motion for protective order is GRANTED, in part. The court issues a protective order as set forth above. The parties must meet and confer to schedule the deposition to be taken within 45 days. Misle is to attend the deposition. The deposition shall be taken remotely. The topics of the deposition shall be as noticed in the Amended Deposition Notice. To the extent that any requested documents were produced to Ownzones, those documents need not again be produced.

(November 6, 2020 Minute Order, p. 6.)

On May 17, 2021, Cross-Complainants filed their operative Second Amended Cross Complaint. (“SACC”) The SACC alleges eleven causes of action as follows: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation, (4) negligent misrepresentation, (5) fraudulent transfer, (6) unjust enrichment, (7) account stated, (8) goods and services rendered/quantum meruit, (9) violation of Business and Professions Code ;17200, et seq., (10) intentional misrepresentation, (11) negligent misrepresentation.

On July 16, 2021, Nahai and ANCS (the “Nahai Parties”) filed a Special Motion to Strike Portions of the SACC.

On July 19, 2021, Genesis, Misle and Belmeko’s Demurrer and Motion to Strike were continued to September 17, 2021 at Plaintiff’s request. Additionally, the court set a hearing for the Nahai Parties’ Special Motion to Strike for September 17, 2021. Further, the Nahai Parties’ motion to dismiss was denied. The Nahai Parties’ demurrer to the SACC was sustained, as to the second cause of action, with 30 days leave to amend. The court’s order stated that the “30 day deadline starts the day of the anti-slap motion ruling.”

The following motions are now before the court today:

1. Misle and Konecne’s Motion for Protective Order

2. Genesi, Misle, Konecne and Belmeko’s Demurrer and Motion to strike portions of SACC

   Ownzones Media Network, Inc. and Dan Goman oppose each motion.

   MISLE AND KONECNE’S MOTION FOR PROTECTIVE ORDER

   Misle and Konecne (“Moving Defendants”) move for a protective order as follows:

   (1) all of their personal banking records Ownzones Media Network obtained from deposition subpoenas served on Heritage Bank of Nevada, Altabank in Utah, Malaga Bank in Los Angeles, and from TCF bank in Colorado be returned to Howard Misle and Meghan Konecne,

   (2) all copies of such documents be destroyed, and

   (3) Ownzone’s counsel submits a declaration verifying that the above was done.

   (Motion, 1-2.)

Meet and Confer

A motion for a protective order under Code of Civil Procedure, section 2025.420 must be accompanied by a meet and confer declaration. (Code Civ. Proc., ; 2025.420, subd. (a).) ¹ The declaration must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion. (Code Civ. Proc., ; 2016.040.) “[A] reasonable and good faith attempt at informal resolution entails something more than bickering with [opposing] counsel…. Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.” (Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.) “A determination of whether an attempt at informal resolution is adequate involves the exercise of discretion.” (Stewart v. Colonial W. Agency (2001) 87 Cal.App.4th 1006, 1016, internal ellipses omitted.) Where a party fails to make any real effort at informal resolution, a particularly egregious failure may justify an immediate and outright denial of further discovery. (Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 433-34, citing Townsend v. Superior Court (1998) 61 Cal.App.4th 1431, 1437.)

Moving Defendants submit the declaration of their counsel, Robert G. Klein (“Klein”) to demonstrate compliance with statutory meet and confer requirements. Klein attests that on May 1, 2021, he emailed Ownzones’ counsel Rebecca Lawlor Calkins informing her that he was filing an ex parte application for a protective order precluding discovery of Moving Defendants’ financial information. (Klein Decl. ¶¶ 2-3, Exh. 8.) Klein attests that after Misle’s April 29, 2021 deposition, he “made several attempts” to get Ownzones’ counsel to engage in a meet and confer discussion by phone but “they refused.” (Klein Decl. ¶ 11.)

The Klein Declaration is sufficient for purposes of Code of Civil Procedure section 2025.420.

Discussion

1. Legal Standard

Code of Civil Procedure, section 2025.420, subdivision (a) provides, in relevant part: “Before, during, or after a deposition, any party, any deponent, or any other affected natural person or organization may promptly move for a protective order.” (Code Civ. Proc., ; 2025.420, subd. (a).) “The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.” (Id., ; 2025.420, subd. (b).) “The court shall limit the scope of discovery if it determines that the burden, expense, or intrusiveness of that discovery clearly outweighs the likelihood that the information sought will lead to the discovery of admissible evidence.” (Code Civ. Proc., ; 2017.020.)

1. Analysis

Pretrial discovery of a defendant’s financial condition is generally not permitted. (Civ. Code, ; 3295(c); Jabro v. Superior Court (2002) 95 Cal.App.4th 754, 756.) However, Civil Code section 3295(c) provides that “[u]pon motion by the plaintiff supported by appropriate affidavits and after a hearing, if the court deems a hearing to be necessary, the court may at any time enter an order permitting the discovery otherwise prohibited by this subdivision if the court finds, on the basis of the supporting and opposing affidavits presented, that the plaintiff has established that there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294.” (Civ. Code, ; 3295(c).) “Such order shall not be considered to be a determination on the merits of the claim or any defense thereto and shall not be given in evidence or referred to at the trial.” (Id.)

“[B]efore a court may enter an order permitting discovery of a defendant’s financial condition, it must (1) weigh the evidence submitted in favor of and in opposition to motion for discovery, and (2) make a finding that it is very likely the plaintiff will prevail on his claim for punitive damages.” (Jabro, supra, 95 Cal.App.4th at 758.)

Moving Defendants contend that Ownzones and Goman should be prohibited from conducting further discovery into their financial condition because they have not obtained leave of court to do so, pursuant to Civil Code section 3295. (Motion, 4-8.) Moving Defendants additionally contend that neither relevancy nor good cause for such discovery into their financial information can be established, because Ownzones and Goman do not have claim for punitive damages against them and any information concerning their private financial information is not relevant to the claims in the Cross-Complaint. (Motion, 8-12.)

In opposition, Ownzones and Goman contend that Civil Code section 3295 provides no justification for Moving Defendants’ motion because Ownzones has been conducting discovery into Moving Defendants’ bank records in order to develop the affirmative defense of unclean hands and to establish the overall defense that Genesis’ lawsuit was “merely a cover.” (Opposition, 7-11.) Ownzones and Goman assert that Moving Defendants’ motion should be denied because it was filed as an excuse for Misle unilaterally terminating his deposition as Belmeko’s Person Most Knowledgeable (“PMK”) on April 29, 2021 despite the November 6, 2020 order indicating that Misle had to sit for this deposition. (Opposition, 1-4.)

In reply, Moving Defendants contend that Ownzones and Goman’s argument about unclean hands fails because only Genesis’ investors would have standing to sue for Misle’s alleged wrongful conduct and Genesis’ act of lending money was authorized by its operating agreement. (Reply, 2-3.)

It is unclear what protective order Moving Defendants seek. Moving Defendants’ notice of motion requests an order that all “personal banking records Ownzones Media Network obtained from deposition subpoenas served on Heritage Bank of Nevada, Altabank in Utah, Malaga Bank in Los Angeles, and from TCF bank in Colorado be returned to Howard Misle and Meghan Konecne.” However, the remainder of Moving Defendants’ motion generally argues that all discovery of any kind into Moving Defendants’ financial condition should be barred because Ownzones and Goman did not obtain leave to conduct such discovery pursuant to Civil Code section 3295.

However, Moving Defendants’ motion also acknowledges that Moving Defendants challenged these subpoenas by motions to quash and had their motions denied. (see Misle Declaration, ¶¶ 9-11.) Moving Defendants do not argue that the motions to quash were improperly decided. Accordingly, Moving Defendants’ motion is denied with respect to the request for return of their financial records.

Second, to the extent that Moving Defendants seek to prevent further questioning of Misle as Belmeko’s PMK, the court agrees with Ownzones and Goman that such a request is improper. For example, Moving Defendants point to Ownzones and Goman’s questioning about Misle’s “financial condition or estate plan” at Misle’s April 29, 2021 deposition. (Motion, 7-8.) However, Moving Defendants fail to show how the highlighted portion of Misle’s deposition constitutes improper questioning, other than generalized statements that Ownzones and Goman’s question have “no purpose.”

Third, Moving Defendants’ have also failed to demonstrate good cause for the remaining requests in their notice of motion that all financial documents be destroyed after being returned to them, and that Ownzones and Goman’s counsel submit a declaration to this effect. Moving Defendants include this request in their notice of motion but the body of their motion and all supporting documents do not demonstrate why they should be entitled to Ownzones and Goman returning all documents they obtained from previous subpoenas and subsequently destroying such documents.

As the parties will recall, the court has previously agreed, that discovery of Misle’s financial records pertaining to Genesis is relevant to issues presented in this action. For example, the court’s ruling on January 27, 2021 for Genesis and Misle’s motion for summary adjudication provided in pertinent part: “[t]he parties’ disputes regarding Genesis’ financial status and transfers to Misle and his companies constitute triable issues of material fact.”

Thus, because Genesis’s “financial status and transfers to Misle and his companies” constitute a triable issue in this action, the court finds that Moving Defendants have not demonstrated good cause for the relief sought in this motion.

For these reasons, Moving Defendants’ motion is denied.

Monetary Sanctions

The court may impose sanctions against any party for engaging in conduct constituting a “misuse of the discovery process.” (Code Civ. Proc., ; 2023.030 (a).) Misuse of the discovery process includes “failing to confer in person, by telephone, or by letter,” “in a reasonable and good faith attempt to resolve informally any dispute concerning discovery.” (Code Civ. Proc., ; 2023.010 (i).) Additionally, the court “shall impose a monetary sanction” against “any party, person, or attorney who unsuccessfully makes or opposes a motion for a protective order under this section, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.” (Code Civ. Proc., ; 2030.090, subd. (d).)

Moving Defendants request sanctions of $6,200 in connection with this motion. (Notice of Motion, 2.) However, Moving Defendants’ motion includes no discussion on why they are entitled to this award. Thus, Moving Defendants’ request is denied.

In opposition, Ownzones and Goman request sanctions of $6,435 on the grounds that the instant motion was filed only as an excuse to flout the November 6, 2020 ruling on Genesis’ motion for protective order. Ownzones and Goman’s request is denied, as the court finds that Moving Defendants acted with substantial justification such that awarding sanctions would be unjust.

Conclusion

Moving Defendants’ motion is denied. Both parties’ requests for sanctions are denied. Moving Defendants are to give notice.

GENESIS, MISLE, KONECNE AND BELMEKO’S DEMURRER TO SACC

Request for Judicial Notice

Genesis, Misle, Konecne and Belmeko (the “Genesis Parties”) request that the court take judicial notice of the following in support of their demurrer and motion to strike:

1. Articles of Organization for Genesis (Exhibit 1);

2. Amended and Restated Operating Agreement for Genesis served on Ownzones and filed with Genesis’ Exhibits in opposition to Ownzones’ motion for summary judgment. (Exhibit 2).

The Genesis Parties’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (c), (d), (h).)

Discussion[1]

1. Legal Authority

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., ; 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . .” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., ; 452; see also Stevens v. Sup. Ct. (1999) 75 Cal.App.4th 594, 601.) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Demurrers do not lie as to only parts of causes of action where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

1. Analysis

1. First Cause of Action: Breach of Contract

   A cause of action for breach of contract consists of the following elements: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) the resulting damages to the plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “The essence of a contract is the meeting of minds on the essential features of the agreement.” (Krasley v. Superior Court (1980) 101 Cal.App.3d 425, 431.) A contract “is unenforceable if the parties fail to agree on a material term or if a material term is not reasonably certain.” (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1623.)

   A written contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect. (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.) An allegation of an oral agreement must “set[] forth the substance of its relative terms.” (Gautier v. General Tel. Co. (1965) 234 Cal.App.2d 302, 305.)

   The Genesis Parties contend that the SACC’s first cause of action is insufficiently pled because the Genesis Parties, other than Genesis itself, are not parties to the Agreement and do not have individual obligations. (Demurrer, 5-8.) Additionally, the Genesis Parties contend that the SACC’s alter ego allegations are insufficient to establish a cause of action against non-parties as a result of the statutory immunity afforded under NRS 86.371 to members of managers of a Nevada LLC like Genesis. (Demurrer, 6-8.) According to the Genesis Parties, “[t]he governance of Genesis is immutable under NRS Chapter 86 and the governing 5 Operating Agreement.” (Demurrer, 7.)

   In opposition, Ownzones and Goman contends that the SACC sufficiently pleads alter ego allegations as to the Genesis Parties. (Opposition, 5-6.) Additionally, Ownzones and Goman contend that the Genesis Parties’ demurrer improperly applies Nevada law, as the SACC is based on violations of the Agreement, an agreement made under California law. (Opposition, 6-8.) Ownzones and Goman contend that the Genesis Parties’ argument must fail because it does not address why Nevada law applies.

   Here, the SACC alleges that Misle was the founder and managing member of Genesis. (SACC ¶ 22.) Konecne is alleged to be the managing member of Belmeko. (SACC ¶ 23.) All Genesis Parties were alleged to be alter egos of each other such that there was a “unity of interest, ownership and control” among the Genesis Parties. (SACC ¶ 27.)

   The court finds that the SACC’s first cause of action is sufficiently pled as to the Genesis Parties. As discussed above, the SACC sufficiently alleges that all Genesis Parties were alter egos of each other. Additionally, the court agrees with Ownzones and Goman that the Genesis Parties’ arguments applying Nevada law must fail. Ownzones and Goman’s action against the Genesis Parties is based on the Agreement, an agreement governed by California law. The court takes judicial notice of the fact that Genesis filed Articles of Organization in Nevada on March 8, 2017, and that Genesis filed its Amended and Restated Operating Agreement with the court in opposition to Ownzones’ motion for summary judgment. However, the court does not take judicial notice of the truth of any facts contained within these documents. Additionally, the Genesis Parties cite no authority in support of their argument that the “governance of Genesis is immutable” under Nevada law, or why Nevada law applies to this action to bar Ownzones and Goman’s claims against the Genesis Parties.

   For these reasons, the Genesis Parties’ demurrer to the first cause of action is overruled.

2. Second Cause of Action: Promissory Fraud

   The elements to prove promissory fraud are: (1) the defendant made a representation of intent to perform some future action, and (2) the defendant did not really have that intent at the time that the promise was made. (Beckwith v. Dahl, (2012) 205 Cal. App. 4th 1039, 1060 (Beckwith)

   The Genesis Parties contend that the second cause of action is insufficiently pled because the SACC fails to allege that any promises were made to Goman in his personal capacity. (Demurrer, 9-10.) Additionally, the Genesis Parties argue that the SACC is insufficiently pled because it fails to plead fraud with the required specificity. (Demurrer, 9-11.) In opposition, Ownzones and Goman contend that the second cause of action is sufficiently pled because the SACC sufficiently alleges specific promises by all Genesis Parties to Ownzones and Goman which were actionable as promissory fraud. (Opposition, 8.)

   Here, the SACC alleges that in or about in or about March and April 2017, Genesis, “through its alter-egos and agents Misle and Nahai” represented to Ownzones and Goman that “it would fund the 420TV venture by paying yearly service fees for ten years.” (SACC ¶¶ 86-87.) Further, in June 2019, Ownzones discovered that the “entire 420TV” operation was part of a “fraudulent scheme by Cross-Defendants” to enrich themselves and Konecne and their businesses. (SACC ¶¶ 71-74.) Specifically, Genesis was allegedly created just so Cross-Defendants could “embezzle the investor funds in Genesis’ bank account. (SACC ¶ 73.) Ownzones and Goman allegedly relied on all of the “false promises” by Cross-Defendants in entering into the Agreement. (SACC ¶¶ 93-95.)

   Liberally construing the allegations of the SACC in favor of Ownzones and Goman, the court finds the SACC’s second cause of action sufficiently pled. The SACC alleges that Genesis made representations to both Ownzones and Goman regarding its intention to pay for 420TV, that all of the Genesis Parties were alter egos of each other, and that Ownzones and Goman relied on these representations. Such allegations are sufficient to state a claim for promissory fraud.

3. Third and Fourth Causes of Action: Intentional Misrepresentation, Negligent Misrepresentation

The elements of a fraud cause of action are: (1) misrepresentation (false representation, concealment, or omission); (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Davis v. Southern California Edison Co. (2015) 236 Cal.App.4th 619.) Fraud must be pled in the complaint specifically. General and conclusory allegations are not sufficient. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) Unlike most causes of action where the “the policy of liberal construction of the pleadings,” fraud requires particularity, that is, “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at 73; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Every element of a fraud cause of action must be alleged both factually and specifically. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904; Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262.)

A Plaintiff must prove the following in order to recover on a negligent ;misrepresentation claim: ;‘[M]isrepresentation ;of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another's reliance on the fact ;misrepresented; ignorance of the truth and justifiable reliance on the ;misrepresentation by the party to whom it was directed; ;and resulting damage....’ ” ;(Hydro-Mill Co., Inc. v. Hayward, Tilton & ;Rolapp ;Ins. Associates, Inc. ;(2004) 115 Cal.App.4th 1145, 1154, quoting ;Shamsian ;v. Atlantic Richfield Co. ;(2003) 107 Cal.App.4th 967, 983.) ; ;

The Genesis Parties contend that the third and fourth causes of action are insufficiently pled because the SACC’s third and fourth causes of action fails to allege how each of the Genesis Parties made actionable misrepresentations with the required specificity. (Demurrer, 11-13.) Additionally, the Genesis Parties contend that the SACC’s allegations about Misle’s projections are not actionable as fraud because they constitute mere opinions. (Id.) Further, the Genesis Parties contend that the SACC is insufficiently pled because it fails to allege any damages which were the result of Belmeko or Konecne’s conduct. (Id.)

In opposition, Ownzones and Goman contend that the third and fourth causes of action are sufficiently pled because the SACC sufficiently pleads that all Genesis Parties are alter egos of each other. (Opposition, 8-9.)

Here, the SACC alleges that while Misle, Nahai and Ownzones were negotiating over the Agreement, Misle, Nahai and Genesis made “certain representations about the advertising revenues they claimed would be generated.” (SACC ¶ 99.) For example, Misle represented that he had “between 6 and 12 cannabis businesses” guaranteed to advertise, which were allegedly false representations. (SACC ¶¶ 100-101.) Ownzones and Goman allegedly relied upon these representations to their detriment. (see SACC ¶¶ 103.)

As discussed above, the court finds that the SACC sufficiently alleges that all Genesis Parties were alter egos of each other. Thus, the Genesis Parties’ argument in support of their demurrer to the third and fourth causes of action fails. The SACC sufficiently alleges that Misle and Genesis made certain specific representations in the course of negotiating the Agreement and that Ownzones and Goman reasonably relied on these representations. Although the SACC does not specifically allege that the remaining Genesis Parties each made misrepresentations to Ownzones and Goman, the SACC is not required to do so in light of the alter ego allegations.

For these reasons, the Genesis Parties’ demurrer to the third and fourth causes of action is overruled.

1. Fifth Cause of Action: Fraudulent Transfer

“A fraudulent conveyance claim is set forth in the Uniform Fraudulent Transfer Act (UFTA), which is codified in Civil Code section 3439 et seq. A fraudulent conveyance is a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648 (Kirkeby), internal quotation marks omitted.)

The Genesis Parties contend that the fifth cause of action is insufficiently pled as to Goman because the SACC does not allege how Goman was a creditor of Genesis as required in the UFTA. (Demurrer, 13-15.) The Genesis Parties contend that Ownzones’ claim under the UFTA also fails because the SACC also fails to establish how Ownzones was a creditor with standing to pursue a claim under the UFTA. (Id.)

In opposition, Ownzones and Goman contend that the fifth cause of action is sufficiently pled because paragraphs 112-116 of the SACC sufficiently allege a claim under the UFTA as to both Ownzones and Goman. (Opposition, 9-10.) Additionally, Ownzones and Goman contend that the Genesis Parties’ argument regarding standing to bring a UFTA claim has already been rejected in a prior ruling on the Genesis Parties’ demurrer. (Id.)

As the parties will recall, Judge White previously ruled that Cross-Complainants have standing to assert a claim under the UFTA. The court agrees with respect to the SACC. Thus, because the Genesis Parties do not demurrer to the eighth cause of action on any other basis, the Genesis Parties’ demurrer is overruled.

1. Ninth Cause of Action: Violation of Business and Professions Code ;17200

Business and Professions Code section 17200 (“UCL”) prohibits “unfair competition,” which is defined to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act prohibited by business and professions code section 17500. A cause of action under the UCL must be stated with “reasonable particularity.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)

The Genesis Parties argue that the SACC’s ninth cause of action is insufficiently pled because Goman is not a business entity entitled to protection under the UCL. (Demurrer, 15.) Additionally, the Genesis Parties contend that the SACC insufficiently alleges unfair business practices with particularity. (Id.) In opposition, Ownzones and Goman contend that the SACC’s ninth cause of action is sufficiently pled for the same reasons that the FACC’s UCL cause of action was found to be sufficiently pled. (Opposition, 10.)

The court agrees with Ownzones and Goman that the SACC’s ninth cause of action is sufficiently pled. For these reasons, the Genesis Parties’ demurrer to the ninth cause of action is overruled.

Conclusion

The Genesis Parties’ demurrer is overruled. Ownzones and Goman are to give notice.

GENESIS, MISLE, KONECNE AND BELMEKO’S MOTION TO STRIKE PORTIONS OF SACC

Discussion

1. Legal Standard

Pursuant to Code of Civil Procedure, section 436, “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out 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.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., ; 437.)

Motions to strike are used to challenge defects in the pleadings not subject to demurrer. (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 529 [recognizing that an objection that the complaint failed to state facts sufficient to constitute a cause of action is ground for a general demurrer, not a motion to strike.].) Any party may move to strike the whole or any part of a pleading within the time allotted to respond to the pleading. (Code Civ. Proc., ; 435, subd. (b)(1).) The allegations of a complaint “must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., ; 452.) The court “read[s] allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume[s] their truth.” (Clauson v. Sup. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

1. Analysis

The Genesis Parties move to strike the following from the SACC:

1. Claims asserted by Goman, as follows:

   1. p. 20,1. 8 (Goman referenced as claimant), l. 26 (Goman)

   2. p. 22,1. 19 (Goman referenced as claimant)

   3. p. 24,1. 28 (Goman referenced as claimant)

   4. p. 25,1. 19 (Goman referenced as claimant)

   5. p. 26,1. 10 and 1. 26 (Goman referenced as claimant)

2. Claims asserted against Konecne and Belmeko, as follows:

   1. p. 1,11. 16-17 (“, one of the alter-egos of Genesis”), l. 20 (“,Konecne”)

   2. p. 5, para. 23 (alleging Konecne as Roe 1)

   3. p. 6, para. 24 (alleging Belmeko as Roe 2)

   4. p. 6,11. 13, 15-23, 27; p. 8,11. 1, 3-4, 6-9, 11

   5. Prayer for Relief, p. 36, l. 24

(Motion, 4-7.)

1. Claims Asserted by Goman

The Genesis Parties contend that all claims brought by Goman must be stricken because Goman lacks standing. (Motion, 4-5.) Specifically, the Genesis Parties contend that Goman lacks standing given that Goman is alleged to be “nothing more than an officer and founder of Ownzones,” and the Genesis Parties owe him no duties. (Id.)

In opposition, Ownzones and Goman contend that the Genesis Parties’ motion must be denied as to the request to strike Goman’s claims because the SACC properly alleges various claims made by Goman individually. (Opposition, 9.) Ownzones and Goman contend that the Genesis Parties failed to cite to any authority which supports striking all of Goman’s allegations when Goman is alleged to be a Cross-Complainant. (Id.)

The court agrees with Ownzones and Goman. The SACC properly includes allegations that reference Goman. For example, the SACC alleges that in February 2017, Misle and Nahai represented to persons, including Goman, that Misle had “6 to 12 cannabis businesses guaranteed to advertise.” (SACC ¶ 56.) The SACC later alleges that Cross-Complainants, including Goman, relied on this statement to their detriment. The Genesis Parties do not cite any authority in support of their argument that all of Goman’s allegations must be stricken from the SACC as false, irrelevant or improper.

For these reasons, the Genesis Parties’ motion is denied as to its request to strike Goman’s claims.

1. Claims Asserted against Konecne and Belmeko

The Genesis Parties contend that allegations against Konecne and Belmeko must be stricken because they are immune from liability under Nevada law. As discussed above, the court rejected the Genesis Parties’ argument in their demurrer that Nevada law applies to this action.

Thus, the Genesis Parties’ motion is denied as to its request to strike allegations against Konecne and Belmeko.

Conclusion

The Genesis Parties’ motion is denied. Ownzones and Goman are to give notice.

"

b'

Case Number: ****6021 Hearing Date: July 19, 2021 Dept: 37

HEARING DATE: July 19, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: OK

MOTION: Motion to Dismiss Second Amended Cross-Complaint

MOVING PARTIES: Cross-Defendants, Alex Nahai and Alex Nahai Consulting Services, Inc.

OPPOSING PARTY: Cross-Complainant, Ownzones Media Network, Inc.

OPPOSITION: July 6, 2021

REPLY: July 12, 2021

TENTATIVE: The Nahai Parties’ motion is denied. Ownzones is to give notice.

MOTION: Demurrer to Second Amended Cross-Complaint

MOVING PARTIES: Cross-Defendants, Alex Nahai and Alex Nahai Consulting Services, Inc.

OPPOSING PARTIES: Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

OPPOSITION: July 6, 2021

REPLY: July 12, 2021

TENTATIVE: The Nahai Parties’ demurrer is overruled. Ownzones and Goman are to give notice.

MOTION: Demurrer to Second Amended Cross-Complaint, Motion to Strike Portions of Second Amended Cross-Complaint

MOVING PARTIES: Plaintiff/Cross-Defendant Genesis Media LLC and Cross-Defendants Howard Misle, Meghan Konecne and Belmeko, LLC

OPPOSING PARTIES: Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

OPPOSITION: July 6, 2021

REPLY: None as of July 15, 2021

TENTATIVE: The Genesis Parties’ demurrer is overruled. The Genesis Parties’ motion is denied. Ownzones and Goman are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman.

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.

On December 5, 2018, Ownzones and Goman (“Cross-Complainants”) filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.

On March 3, 2020, Ownzones and Goman filed amendments to their cross-complaint, naming Alex Nahai (“Nahai”) and Alex Nahai Consulting (“ANCS”) as roes 3 and 4. On December 28, 2020, Nahai an ANCS’ motion to strike these roe amendments was granted, and the roe amendments were stricken.

On May 17, 2021, Cross-Complainants filed their operative Second Amended Cross Complaint. (“SACC”) The SACC alleges eleven causes of action as follows: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation, (4) negligent misrepresentation, (5) fraudulent transfer, (6) unjust enrichment, (7) account stated, (8) goods and services rendered/quantum meruit, (9) violation of Business and Professions Code ;17200, et seq., (10) intentional misrepresentation, (11) negligent misrepresentation.

Nahai and ANCS (“Nahai Parties”) move to dismiss the SACC and also demurrer to the SACC’s first, second, third, fourth, sixth, seventh, eighth, ninth, tenth and eleventh causes of action. Genesis, Misle, Konecne and Belmeko also demurrer to portions of the SACC.

Ownzones and Goman oppose all motions. The court will address each motion individually.

MOTION TO DISMISS

Discussion

The Nahai Parties contend that the SACC must be dismissed because Ownzones and Goman have failed to comply with the dispute resolution process provided for in the Agreement at section 16. (Motion, 3-7.) Section 16 of the Agreement provides in pertinent part:

16. Dispute Resolution. If a dispute arises under this Agreement (a "Dispute"), including without limitation any Disputes arising out of any amount due to a Party hereto, then prior to bringing any suit, action or proceeding in connection with such Dispute, a party must first give written notice of the Dispute to the other Party describing the Dispute and requesting it be resolved pursuant to this dispute resolution process (the "Dispute Notice"). If the Parties in the Dispute are unable to resolve the Dispute with thirty (30) days of delivery of the Dispute Notice, then each such Party shall promptly (but no later than five (5.) business days thereafter) (a) appoint a designated representative who has sufficient authority to settle the Dispute and who is at a higher management level than the person with direct responsibility for the administration of this Agreement, if applicable (the "Designated Representative"), and (b) notify the other Party in writing of the name and contact information of such Designated Representative. The Designated Representatives shall then meets [sic.] as often as they deem necessary in their reasonable judgment in order to discuss the Dispute and negotiate in good faith to resolve the Dispute. The Designated Representatives shall mutually determine the format for such discussions and negotiations, provided that all reasonable requests for relevant information relating the Dispute made by one Party to the other Party shall be honored. If the Parties in the Dispute are unable to resolve the Dispute within thirty (30) days after the appointment of the Designated Representatives, then either Party may proceed with any other available remedy.

(Motion, 4.)

Additionally, the Nahai Parties primarily rely on Charles J. Rounds Co. v. Joint Council of Teamsters No. 42 (1971) 4 Cal.3d 888 (Charles J) in support of their argument that failure to comply with a dispute a resolution process is grounds to dismiss an action.

In Charles J, an employer appealed from a judgment of the trial court dismissing an action on the grounds that the underlying dispute was covered by an arbitration clause. (Id. at 890.) The employer filed a complaint against various employee unions seeking damages for breach of a “no-strike” clause in a collective bargaining agreement between the parties. (Id. at 891.) The unions made various attempts at forcing the employer into arbitration pursuant to the arbitration clause in this agreement. (Id.) The California Supreme Court held that based on the language of the collective bargaining agreement, the agreement clearly indicates “that the parties intended to establish a system of dispute resolution.” (Id. at 891-893.) Additionally, the California Supreme Court concluded that dismissal of the employer’s action was proper because the employer failed to pursue arbitration and defendants consistently asserted failure to pursue arbitration as an affirmative defense. (Id. at 895-900.)

In opposition, Ownzones contends that the Nahai Parties’ motion must be denied because Charles J does not stand for the general proposition that failure to follow dispute resolution procedures is grounds to dismiss an action, as there is no issue here of an arbitration provision of the Nahai Parties asserting failure to arbitrate as an affirmative defense. (Opposition, 7-10.) Additionally, Ownzones contends that the Nahai Parties have cited to no other authority in support of their argument that the SACC must be dismissed. (Id.)

The court agrees with Ownzones that Charles J does not support the Nahai Parties arguments. Specifically, Charles J analyzed whether dismissal for failure to pursue arbitration was proper and concluded dismissal was proper in this particular instance because of the parties’ conduct in pursuing or failing to pursue arbitration. The dispute resolution process in the Agreement does not include an arbitration provision, and there was no issue of whether either party pursued arbitration. The Nahai Parties cite no other authority in support of their argument that the SACC must be dismissed.

For these reasons, the Nahai Parties’ motion is denied.

Conclusion

The Nahai Parties’ motion is denied. Ownzones is to give notice.

NAHAI PARTIES’ DEMURRER TO SACC

Request for Judicial Notice

The Nahai Parties request that the court take judicial notice of the following in support of their demurrer to the SACC:

1. Complaint filed by Ownzones Media Network, Inc. 7 on March 10, 2021, in Los Angeles Superior Court Case No. 21 STCV09553 (Exhibit 1).

2. Ownzones’ Objections and Responses to Nahai’s Request for Admissions, set One. (Request for Judicial Notice in Support of Reply, Exh. 2.)

3. Nahai Parties’ Demand for Copies of Pleadings and Other Documents. (Request for Judicial Notice in Support of Reply, Exh. 3.)

The Nahai Parties’ request is granted. The existence and legal significance of this document is a proper matter for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Discussion[1]

1. Legal Authority

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., ; 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . .” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., ; 452; see also Stevens v. Sup. Ct. (1999) 75 Cal.App.4th 594, 601.) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Demurrers do not lie as to only parts of causes of action where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

1. Analysis

1. General Demurrer to All Causes of Action

   The Nahai Parties contend that the SACC must be dismissed in its entirety pursuant to Code of Civil Procedure section 430.10(c) because there is another action pending between Cross-Complainants and the Nahai Parties. (Demurrer, 10-11.) On March 10, 2021, Ownzones filed a complaint against the Nahai Parties entitled Ownzones Media Network, Inc. v. Alex Nahai, et al. (the “Separate Action”) (Los Angeles Superior Court Case No. 21STCV09553; Request for Judicial Notice, Exh. 1.) According to the Nahai Parties, this complaint mirrors the allegations of the SACC.

   In opposition, Ownzones and Goman contend that the general demurrer must be overruled because the Nahai Parties have been parties to this action since March 3, 2020. (Opposition, 11-12.) Additionally, Ownzones and Goman contend that the Separate Action is not grounds for dismissal of the SACC because the Nahai Parties have not answered the separate action and thus, nothing is yet at issue. (Id.)

   In reply, the Nahai Parties contend that the SACC must be dismissed because the court has determined that this action is related to a “another pending civil case” pursuant to California Rules of Court, rule 3.300(a). (Reply, 4.)

   Ownzones and Goman correctly point out that in the Separate Action, the Nahai Parties have not answered or otherwise appeared. Thus, the action is not pending as to the Nahai Parties because the action is not at issue. Contrary to the Nahai Parties’ contention, a ruling that one action is related to another has no bearing on whether the other action is “pending” for purposes of Code of Civil Procedure section 430.10, subdivision (c).

   For these reasons, the court will not sustain the Nahai Parties demurrer to the entire SACC based on Code of Civil Procedure section 430.10(c).

2. First Cause of Action: Breach of Contract

   A cause of action for breach of contract consists of the following elements: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) the resulting damages to the plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “The essence of a contract is the meeting of minds on the essential features of the agreement.” (Krasley v. Superior Court (1980) 101 Cal.App.3d 425, 431.) A contract “is unenforceable if the parties fail to agree on a material term or if a material term is not reasonably certain.” (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1623.)

   A written contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect. (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.) An allegation of an oral agreement must “set[] forth the substance of its relative terms.” (Gautier v. General Tel. Co. (1965) 234 Cal.App.2d 302, 305.)

   The Nahai Parties contend that the SACC’s contract-based causes of action are all insufficiently pled because the Agreement contains no obligation for the Nahai Parties to pay Cross-Complainants. (Demurrer, 11-12.) Additionally, the Nahai Parties contend that the alter ego allegations do not “rescue” the SACC because they are boilerplate allegations and if given weight, would render the Agreement “meaningless.” (Demurrer, 18-22.) The Nahai Parties cite to Luis v. Orcutt Town Water Co. (1962) 204 Cal.App.3d 433, 443-444 (Luis) in support of this argument.

   In Luis, an individual business owner brought an action alleging that his business was destroyed by fire as a result of defendants’ unreasonable delay to supply water to combat the fire. (Id. at 437-438.) The court of appeal reasoned that defendants in this action could not be held liable to plaintiff because he was not a party to any contract with defendants and thus, defendants had no duty to supply his business water. (Id. at 437-440.) Additionally, the Court of Appeal noted that plaintiff’s alter ego allegations do not save plaintiff’s action because it pleads the contract at issue “out of existence,” as the remaining entity cannot legally contract with itself. (Id. at 444.)

   In opposition, Ownzones and Goman contend that the contract-based causes of action are sufficiently pled because ANCS is alleged to be a contracting party to the Agreement and the SACC sufficiently alleges alter ego liability as to Nahai. (Opposition, 4-7.) Ownzones and Goman also contend that the Nahai Parties’ demurrer should be overruled because the Nahai Parties cite no authority in support of the argument that they are not liable under the Agreement simply because they are not specifically named in various portions of the Agreement. (Id.)

   Here, the SACC alleges that Nahai did “influence and control Genesis” and that a unity of interest and ownership existed between Nahai and Genesis such that Nahai “was and is the alter ego of Genesis.” (SACC ¶ 29.) Additionally, ANCS is also alleged to be the alter ego of Genesis. (SACC ¶ 30.) Genesis, ANCS and Ownzones entered into the Agreement on May 22, 2017. (SACC ¶ 38.) The Agreement provided at section 5.1 that Genesis would pay Ownzones an annual service fee of $4.1 million. (SACC ¶ 41.) All Cross-Defendants breached the Agreement by, “among other things,” failing to pay Ownzones the annual service fee and failing to pay reasonable costs to wind down. (SACC ¶¶ 78-81.)

   Liberally construing the allegations of the SACC in favor of Ownzones and Goman, the court finds the SACC’s first cause of action sufficiently pled. The SACC alleges that ANCS was a party to the Agreement and that both ANCS and Nahai were alter egos of Genesis, another party to the Agreement. The Nahai Parties’ reliance on Luis is misplaced because Luis is factually inapposite. There is no issue of rendering the Agreement a nullity in this instance, as the SACC alleges that Genesis, ANCS and Ownzones were all parties to the Agreement. Additionally, the SACC specifically alleges portions of the Agreement which Genesis breached. Such allegations are sufficient to state a claim for breach of contract against the Nahai Parties.

   For these reasons, the Nahai Parties’ demurrer to the first cause of action is overruled.

3. Second Cause of Action: Promissory Fraud

The elements to prove promissory fraud are: (1) the defendant made a representation of intent to perform some future action, and (2) the defendant did not really have that intent at the time that the promise was made. (Beckwith v. Dahl, (2012) 205 Cal. App. 4th 1039, 1060 (Beckwith)

The Nahai Defendants contend that the SACC’s fraud causes of action are insufficiently pled because the SACC conflicts with the terms of the Agreement and additionally, are time-barred on their face because the Agreement was entered into on May 22, 2017, and thus, the deadline to bring fraud claims was May 2020. (Demurrer, 13-17.) The Nahai Parties also contend that the fraud allegations are insufficient because they contain a statement of opinion about a future event which is not actionable. (Id.) The Nahai Parties cite Borba v. Thomas (1977) 70 Cal.App.3d 144, 152 (Borba) for this argument. Additionally, the Nahai Defendants contend that the SACC fails to plead fraud with the required specificity as to the Nahai Parties. (Id.)

In Borba, plaintiff brought an action for fraud in connection with representations made during the course of a sale of land. (Borba, supra, 70 Cal.App.3d at 146-151.) Specifically, plaintiff alleged that defendant’s statement that there would be “no problem” in getting approval of a $850,000 purchase price constitutes fraud. (Id. at 152.) The Court of Appeal held that this statement was not actionable. (Id. at 152-155.) Specifically, the Court of Appeal stated that “[a]bsent some special relationship between the parties, a private person is not entitled to rely on the opinion of another private person concerning the future decisions of a public body.” (Id. at 154.)

In opposition, Ownzones and Goman contend that the SACC’s fraud claims are sufficiently pled because the SACC alleges that the Nahai Parties are alter egos of the remaining Cross-Defendants. (Opposition, 7-11.) Additionally, Ownzones and Goman contend that the SACC is sufficiently pled because it alleges misrepresentations made during the negotiation of the Agreement that Ownzones and Goman reasonably relied upon. (Id.)

Here, as discussed above, the SACC alleges that the Nahai Parties were alter egos of Genesis. and that Genesis failed to pay the service fee required by the Agreement to Ownzones. Additionally, the SACC alleges that Genesis, “through its alter-egos and agents Misle and Nahai” represented to Ownzones and Goman that “it would fund the 420TV venture by paying yearly service fees for ten years” despite having no intention of doing so. (SACC ¶ 86.) Additionally, from March or April 2017 to May 2018, Misle and Nahai allegedly repeatedly promised Ownzones that payment was forthcoming. (SACC ¶¶ 91-92.) Ownzones and Goman relied on these promises. (SACC ¶¶ 93-94.)

The court finds the SACC’s second cause of action sufficiently pled. First, the Nahai Parties’ argument that the SACC’s fraud causes of action fails. The Nahai Parties have cited no authority for the proposition that the three-year statute of limitations expires three years after the Agreement was entered into. Second, the Nahai Parties’ reliance on Borba is also misplaced. Borba does not stand for the general proposition that a statement about future events is not actionable as fraud because Borba is factually inapposite. As discussed above, the Borba court held that a private person is not entitled to rely on another person about the “future decisions of a public body.” There is no public body at issue in this action. Third, the court has already found that the SACC sufficiently alleges alter ego allegations as to the Nahai Parties. Thus, the SACC’s second cause of action for promissory fraud is sufficiently alleged against the Nahai Parties.

For these reasons, the Nahai Parties’ demurrer to the second cause of action is overruled.

1. Third, Fourth, Tenth and Eleventh Causes of Action: Intentional Misrepresentation, Negligent Misrepresentation

The elements of a fraud cause of action are: (1) misrepresentation (false representation, concealment, or omission); (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Davis v. Southern California Edison Co. (2015) 236 Cal.App.4th 619.) Fraud must be pled in the complaint specifically. General and conclusory allegations are not sufficient. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) Unlike most causes of action where the “the policy of liberal construction of the pleadings,” fraud requires particularity, that is, “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at 73; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Every element of a fraud cause of action must be alleged both factually and specifically. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904; Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262.)

A Plaintiff must prove the following in order to recover on a negligent ;misrepresentation claim: ;‘[M]isrepresentation ;of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another\'s reliance on the fact ;misrepresented; ignorance of the truth and justifiable reliance on the ;misrepresentation by the party to whom it was directed; ;and resulting damage....’ ” ;(Hydro-Mill Co., Inc. v. Hayward, Tilton & ;Rolapp ;Ins. Associates, Inc. ;(2004) 115 Cal.App.4th 1145, 1154, quoting ;Shamsian ;v. Atlantic Richfield Co. ;(2003) 107 Cal.App.4th 967, 983.) ; ;

The Nahai Parties’ demurrer to the third, fourth and tenth through eleventh causes of action is based on the same arguments as the demurrer to the second cause of action. Having overruled the demurrer as to the second cause of action, the court now overrules the Nahai Parties’ demurrer as to the third, fourth, tenth and eleventh causes of action for the same reasons stated.

1. Sixth, Seventh and Eighth Cause of Action: Unjust Enrichment, Account Stated, Goods and Services Rendered

   The Nahai Parties’ demurrer to the sixth, seventh and eighth causes of action based on the same arguments stated as to the first cause of action. Having overruled the Nahai Parties’ demurrer as to the first cause of action, the court now overrules the Nahai Parties’ demurrer as to the sixth, seventh and eighth causes of action.

2. Ninth Cause of Action: Violation of Business and Professions Code ;17200

Business and Professions Code section 17200 (“UCL”) prohibits “unfair competition,” which is defined to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act prohibited by business and professions code section 17500. A cause of action under the UCL must be stated with “reasonable particularity.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)

The Nahai Parties contend that the ninth cause of action is insufficiently pled because the ninth cause of action is entirely unclear as to what actions the Nahai Parties undertook which constitute violations of the UCL. (Demurrer, 17-18.) In opposition, Ownzones and Goman contend that the ninth cause of action is sufficiently pled for the same reasons that the FACC’s cause of action for violation of the UCL was previously held to be sufficiently pled. (Opposition, 11.)

Here, the SACC alleges that “the acts and conduct of Cross-Defendants as alleged above” constitute “unlawful, unfair, and or fraudulent business acts or practices.” (SACC ¶ 133.) The SACC further alleges that these “acts of unlawful, unfair, and fraudulent competition” have caused “harm to competition, to consumers, and to its competitors.” (SACC ¶ 134.)

For the same reason, the court finds the ninth cause of action sufficiently pled. Thus, the Nahai Parties’ demurrer is overruled.

Conclusion

The Nahai Parties’ demurrer is overruled. Ownzones and Goman are to give notice.

GENESIS, MISLE, KONECNE AND BELMEKO’S DEMURRER TO SACC

Request for Judicial Notice

Genesis, Misle, Konecne and Belmeko (the “Genesis Parties”) request that the court take judicial notice of the following in support of their demurrer and motion to strike:

1. Articles of Organization for Genesis (Exhibit 1);

2. Amended and Restated Operating Agreement for Genesis served on Ownzones and filed with Genesis’ Exhibits in opposition to Ownzones’ motion for summary judgment. (Exhibit 2).

The Genesis Parties’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (c), (d), (h).)

Discussion[2]

1. Legal Authority

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., ; 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . .” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., ; 452; see also Stevens v. Sup. Ct. (1999) 75 Cal.App.4th 594, 601.) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Demurrers do not lie as to only parts of causes of action where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

1. Analysis

1. First Cause of Action: Breach of Contract

   A cause of action for breach of contract consists of the following elements: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) the resulting damages to the plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “The essence of a contract is the meeting of minds on the essential features of the agreement.” (Krasley v. Superior Court (1980) 101 Cal.App.3d 425, 431.) A contract “is unenforceable if the parties fail to agree on a material term or if a material term is not reasonably certain.” (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1623.)

   A written contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect. (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.) An allegation of an oral agreement must “set[] forth the substance of its relative terms.” (Gautier v. General Tel. Co. (1965) 234 Cal.App.2d 302, 305.)

   The Genesis Parties contend that the SACC’s first cause of action is insufficiently pled because the Genesis Parties, other than Genesis itself, are not parties to the Agreement and do not have individual obligations. (Demurrer, 5-8.) Additionally, the Genesis Parties contend that the SACC’s alter ego allegations are insufficient to establish a cause of action against non-parties as a result of the statutory immunity afforded under NRS 86.371 to members of managers of a Nevada LLC like Genesis. (Demurrer, 6-8.) According to the Genesis Parties, “[t]he governance of Genesis is immutable under NRS Chapter 86 and the governing 5 Operating Agreement.” (Demurrer, 7.)

   In opposition, Ownzones and Goman contends that the SACC sufficiently pleads alter ego allegations as to the Genesis Parties. (Opposition, 5-6.) Additionally, Ownzones and Goman contend that the Genesis Parties’ demurrer improperly applies Nevada law, as the SACC is based on violations of the Agreement, an agreement made under California law. (Opposition, 6-8.) Ownzones and Goman contend that the Genesis Parties’ argument must fail because it does not address why Nevada law applies.

   Here, the SACC alleges that Misle was the founder and managing member of Genesis. (SACC ¶ 22.) Konecne is alleged to be the managing member of Belmeko. (SACC ¶ 23.) All Genesis Parties were alleged to be alter egos of each other such that there was a “unity of interest, ownership and control” among the Genesis Parties. (SACC ¶ 27.)

   The court finds that the SACC’s first cause of action is sufficiently pled as to the Genesis Parties. As discussed above, the SACC sufficiently alleges that all Genesis Parties were alter egos of each other. Additionally, the court agrees with Ownzones and Goman that the Genesis Parties’ arguments applying Nevada law must fail. Ownzones and Goman’s action against the Genesis Parties is based on the Agreement, an agreement governed by California law. The court takes judicial notice of the fact that Genesis filed Articles of Organization in Nevada on March 8, 2017, and that Genesis filed its Amended and Restated Operating Agreement with the court in opposition to Ownzones’ motion for summary judgment. However, the court does not take judicial notice of the truth of any facts contained within these documents. Additionally, the Genesis Parties cite no authority in support of their argument that the “governance of Genesis is immutable” under Nevada law, or why Nevada law applies to this action to bar Ownzones and Goman’s claims against the Genesis Parties.

   For these reasons, the Genesis Parties’ demurrer to the first cause of action is overruled.

2. Second Cause of Action: Promissory Fraud

   The elements to prove promissory fraud are: (1) the defendant made a representation of intent to perform some future action, and (2) the defendant did not really have that intent at the time that the promise was made. (Beckwith v. Dahl, (2012) 205 Cal. App. 4th 1039, 1060 (Beckwith)

   The Genesis Parties contend that the second cause of action is insufficiently pled because the SACC fails to allege that any promises were made to Goman in his personal capacity. (Demurrer, 9-10.) Additionally, the Genesis Parties argue that the SACC is insufficiently pled because it fails to plead fraud with the required specificity. (Demurrer, 9-11.) In opposition, Ownzones and Goman contend that the second cause of action is sufficiently pled because the SACC sufficiently alleges specific promises by all Genesis Parties to Ownzones and Goman which were actionable as promissory fraud. (Opposition, 8.)

   Here, the SACC alleges that in or about in or about March and April 2017, Genesis, “through its alter-egos and agents Misle and Nahai” represented to Ownzones and Goman that “it would fund the 420TV venture by paying yearly service fees for ten years.” (SACC ¶¶ 86-87.) Further, in June 2019, Ownzones discovered that the “entire 420TV” operation was part of a “fraudulent scheme by Cross-Defendants” to enrich themselves and Konecne and their businesses. (SACC ¶¶ 71-74.) Specifically, Genesis was allegedly created just so Cross-Defendants could “embezzle the investor funds in Genesis’ bank account. (SACC ¶ 73.) Ownzones and Goman allegedly relied on all of the “false proises” by Cross-Defendants in entering into the Agreement. (SACC ¶¶ 93-95.)

   Liberally construing the allegations of the SACC in favor of Ownzones and Goman, the court finds the SACC’s second cause of action sufficiently pled. The SACC alleges that Genesis made representations to both Ownzones and Goman regarding its intention to pay for 420TV, that all of the Genesis Parties were alter egos of each other, and that Ownzones and Goman relied on these representations. Such allegations are sufficient to state a claim for promissory fraud.

3. Third and Fourth Causes of Action: Intentional Misrepresentation, Negligent Misrepresentation

The elements of a fraud cause of action are: (1) misrepresentation (false representation, concealment, or omission); (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Davis v. Southern California Edison Co. (2015) 236 Cal.App.4th 619.) Fraud must be pled in the complaint specifically. General and conclusory allegations are not sufficient. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) Unlike most causes of action where the “the policy of liberal construction of the pleadings,” fraud requires particularity, that is, “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at 73; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Every element of a fraud cause of action must be alleged both factually and specifically. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904; Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262.)

A Plaintiff must prove the following in order to recover on a negligent ;misrepresentation claim: ;‘[M]isrepresentation ;of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another\'s reliance on the fact ;misrepresented; ignorance of the truth and justifiable reliance on the ;misrepresentation by the party to whom it was directed; ;and resulting damage....’ ” ;(Hydro-Mill Co., Inc. v. Hayward, Tilton & ;Rolapp ;Ins. Associates, Inc. ;(2004) 115 Cal.App.4th 1145, 1154, quoting ;Shamsian ;v. Atlantic Richfield Co. ;(2003) 107 Cal.App.4th 967, 983.) ; ;

The Genesis Parties contend that the third and fourth causes of action are insufficiently pled because the SACC’s third and fourth causes of action fails to allege how each of the Genesis Parties made actionable misrepresentations with the required specificity. (Demurrer, 11-13.) Additionally, the Genesis Parties contend that the SACC’s allegations about Misle’s projections are not actionable as fraud because they constitute mere opinions. (Id.) Further, the Genesis Parties contend that the SACC is insufficiently pled because it fails to allege any damages which were the result of Belmeko or Konecne’s conduct. (Id.)

In opposition, Ownzones and Goman contend that the third and fourth causes of action are sufficiently pled because the SACC sufficiently pleads that all Genesis Parties are alter egos of each other. (Opposition, 8-9.)

Here, the SACC alleges that while Misle, Nahai and Ownzones were negotiating over the Agreement, Misle, Nahai and Genesis made “certain representations about the advertising revenues they claimed would be generated.” (SACC ¶ 99.) For example, Misle represented that he had “between 6 and 12 cannabis businesses” guaranteed to advertise, which were allegedly false representations. (SACC ¶¶ 100-101.) Ownzones and Goman allegedly relied upon these representations to their detriment. (see SACC ¶¶ 103.)

As discussed above, the court finds that the SACC sufficiently alleges that all Genesis Parties were alter egos of each other. Thus, the Genesis Parties’ argument in support of their demurrer to the third and fourth causes of action fails. The SACC sufficiently alleges that Misle and Genesis made certain specific representations in the course of negotiating the Agreement and that Ownzones and Goman reasonably relied on these representations. Although the SACC does not specifically allege that the remaining Genesis Parties each made misrepresentations to Ownzones and Goman, the SACC is not required to do so in light of the alter ego allegations.

For these reasons, the Genesis Parties’ demurrer to the third and fourth causes of action is overruled.

1. Fifth Cause of Action: Fraudulent Transfer

“A fraudulent conveyance claim is set forth in the Uniform Fraudulent Transfer Act (UFTA), which is codified in Civil Code section 3439 et seq. A fraudulent conveyance is a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648 (Kirkeby), internal quotation marks omitted.)

The Genesis Parties contend that the fifth cause of action is insufficiently pled as to Goman because the SACC does not allege how Goman was a creditor of Genesis as required in the UFTA. (Demurrer, 13-15.) The Genesis Parties contend that Ownzones’ claim under the UFTA also fails because the SACC also fails to establish how Ownzones was a creditor with standing to pursue a claim under the UFTA. (Id.)

In opposition, Ownzones and Goman contend that the fifth cause of action is sufficiently pled because paragraphs 112-116 of the SACC sufficiently allege a claim under the UFTA as to both Ownzones and Goman. (Opposition, 9-10.) Additionally, Ownzones and Goman contend that the Genesis Parties’ argument regarding standing to bring a UFTA claim has already been rejected in a prior ruling on the Genesis Parties’ demurrer. (Id.)

As the parties will recall, Judge White previously ruled that Cross-Complainants have standing to assert a claim under the UFTA. The court agrees with respect to the SACC. Thus, because the Genesis Parties do not demurrer to the eighth cause of action on any other basis, the Genesis Parties’ demurrer is overruled.

1. Ninth Cause of Action: Violation of Business and Professions Code ;17200

Business and Professions Code section 17200 (“UCL”) prohibits “unfair competition,” which is defined to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act prohibited by business and professions code section 17500. A cause of action under the UCL must be stated with “reasonable particularity.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)

The Genesis Parties argue that the SACC’s ninth cause of action is insufficiently pled because Goman is not a business entity entitled to protection under the UCL. (Demurrer, 15.) Additionally, the Genesis Parties contend that the SACC insufficiently alleges unfair business practices with particularity. (Id.) In opposition, Ownzones and Goman contend that the SACC’s ninth cause of action is sufficiently pled for the same reasons that the FACC’s UCL cause of action was found to be sufficiently pled. (Opposition, 10.)

The court agrees with Ownzones and Goman that the SACC’s ninth cause of action is sufficiently pled. For these reasons, the Genesis Parties’ demurrer to the ninth cause of action is overruled.

Conclusion

The Genesis Parties’ demurrer is overruled. Ownzones and Goman are to give notice.

GENESIS, MISLE, KONECNE AND BELMEKO’S MOTION TO STRIKE PORTIONS OF SACC

Discussion

1. Legal Standard

Pursuant to Code of Civil Procedure, section 436, “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out 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.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., ; 437.)

Motions to strike are used to challenge defects in the pleadings not subject to demurrer. (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 529 [recognizing that an objection that the complaint failed to state facts sufficient to constitute a cause of action is ground for a general demurrer, not a motion to strike.].) Any party may move to strike the whole or any part of a pleading within the time allotted to respond to the pleading. (Code Civ. Proc., ; 435, subd. (b)(1).) The allegations of a complaint “must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., ; 452.) The court “read[s] allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume[s] their truth.” (Clauson v. Sup. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

1. Analysis

The Genesis Parties move to strike the following from the SACC:

1. Claims asserted by Goman, as follows:

   1. p. 20,1. 8 (Goman referenced as claimant), l. 26 (Goman)

   2. p. 22,1. 19 (Goman referenced as claimant)

   3. p. 24,1. 28 (Goman referenced as claimant)

   4. p. 25,1. 19 (Goman referenced as claimant)

   5. p. 26,1. 10 and 1. 26 (Goman referenced as claimant)

2. Claims asserted against Konecne and Belmeko, as follows:

   1. p. 1,11. 16-17 (“, one of the alter-egos of Genesis”), l. 20 (“,Konecne”)

   2. p. 5, para. 23 (alleging Konecne as Roe 1)

   3. p. 6, para. 24 (alleging Belmeko as Roe 2)

   4. p. 6,11. 13, 15-23, 27; p. 8,11. 1, 3-4, 6-9, 11

   5. Prayer for Relief, p. 36, l. 24

(Motion, 4-7.)

1. Claims Asserted by Goman

The Genesis Parties contend that all claims brought by Goman must be stricken because Goman lacks standing. (Motion, 4-5.) Specifically, the Genesis Parties contend that Goman lacks standing given that Goman is alleged to be “nothing more than an officer and founder of Ownzones,” and the Genesis Parties owe him no duties. (Id.)

In opposition, Ownzones and Goman contend that the Genesis Parties’ motion must be denied as to the request to strike Goman’s claims because the SACC properly alleges various claims made by Goman individually. (Opposition, 9.) Ownzones and Goman contend that the Genesis Parties failed to cite to any authority which supports striking all of Goman’s allegations when Goman is alleged to be a Cross-Complainant. (Id.)

The court agrees with Ownzones and Goman. The SACC properly includes allegations that reference Goman. For example, the SACC alleges that in February 2017, Misle and Nahai represented to persons, including Goman, that Misle had “6 to 12 cannabis businesses guaranteed to advertise.” (SACC ¶ 56.) The SACC later alleges that Cross-Complainants, including Goman, relied on this statement to their detriment. The Genesis Parties do not cite any authority in support of their argument that all of Goman’s allegations must be stricken from the SACC as false, irrelevant or improper.

For these reasons, the Genesis Parties’ motion is denied as to its request to strike Goman’s claims.

1. Claims Asserted against Konecne and Belmeko

The Genesis Parties contend that allegations against Konecne and Belmeko must be stricken because they are immune from liability under Nevada law. As discussed above, the court rejected the Genesis Parties’ argument in their demurrer that Nevada law applies to this action.

Thus, the Genesis Parties’ motion is denied as to its request to strike allegations against Konecne and Belmeko.

Conclusion

The Genesis Parties’ motion is denied. Ownzones and Goman are to give notice.

'

Case Number: ****6021    Hearing Date: June 3, 2021    Dept: 37

HEARING DATE: June 3, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

MOVING PARTIES: Defendants and Cross-Complainants Ownzones Media Network, Inc.

OPPOSING PARTIES: Plaintiffs and Cross-Defendants Genesis Media, LLC, Howard Misle, Meghan Konecne, Belmeko LLC; Non-Parties Alex Nahai and Nahai Consulting Services, Inc.

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: OK

MOTION: Motion to Compel Further Responses to Form Interrogatories

MOVING PARTY: Plaintiff and Cross-Defendant, Genesis Media, LLC

OPPOSING PARTY: Defendant and Cross-Complainant, Dan Goman

OPPOSITION: May 20, 2021

REPLY: May 26, 2021

TENTATIVE: Genesis’ motion is granted as to interrogatory 2.2 and otherwise denied. Both parties’ requests for sanctions are denied. Goman is to serve verified supplemental responses within 30 days. Genesis is to give notice.

MOTION: Motion to Compel Further Responses to Special Interrogatories

MOVING PARTY: Plaintiff and Cross-Defendant, Genesis Media, LLC

OPPOSING PARTY: Defendant and Cross-Complainant, Ownzones Media Network, Inc.

OPPOSITION: May 20, 2021

REPLY: May 26, 2021

TENTATIVE: Genesis’ motion is denied. Both parties’ requests for sanctions are also denied. Ownzones is to give notice.

MOTION: Motion to Compel Further Responses to Requests for Production, Set One

MOVING PARTY: Plaintiff and Cross-Defendant, Genesis Media, LLC

OPPOSING PARTY: Defendant and Cross-Complainant, Ownzones Media Network, Inc.

OPPOSITION: May 20, 2021

REPLY: May 26, 2021

TENTATIVE: Genesis’ motion is denied. Both parties’ requests for sanctions are also denied. Ownzones is to give notice.

MOTION: Motion to Compel Further Responses to Requests for Admission, Set One

MOVING PARTY: Plaintiff and Cross-Defendant, Genesis Media, LLC

OPPOSING PARTY: Defendant and Cross-Complainant, Dan Goman

OPPOSITION: May 20, 2021

REPLY: May 26, 2021

TENTATIVE: Genesis’ motion is denied. Both parties’ requests for sanctions are also denied. Goman is to give notice.

Background

The background of this case is summarized in numerous other minute orders. (See, e.g., 5/13/21; 4/14/21.)

On May 17, 2021, Cross-Complainants filed their operative Second Amended Cross Complaint. (“SACC”) The SACC alleges eleven causes of action as follows: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation, (4) negligent misrepresentation, (5) fraudulent transfer, (6) unjust enrichment, (7) account stated, (8) goods and services rendered/quantum meruit, (9) violation of Business and Professions Code ;17200, et seq., (10) intentional misrepresentation, (11) negligent misrepresentation.

Genesis now moves to compel further responses to Form Interrogatories and Requests for Admission from Goman. Genesis also moves to compel further responses to Requests for Production and Special Interrogatories from Ownzones.

Ownzones and Goman oppose Genesis’ motions. The court will address each motion individually.

MOTION TO COMPEL FURTHER RESPONSES TO FORM INTERROGATORIES

Request for Judicial Notice

Genesis moves for judicial notice of the following in support of its motion:

1. Securities and Exchange V. Ownzones Media Network et. al. case number 2:20-cv-03108 filed April 2, 2020;

2. Answer by Cross Defendant Genesis Media to Ownzones Media’s first amended cross complaint.

Genesis’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Procedural History

Genesis served Goman with Form Interrogatories, Set One on September 21, 2020. (Declaration of Robert G. Klein (“Klein Decl.”), ¶ 8.) Goman served his responses on October 23, 2020. (Klein Decl. ¶ 10, Exh. 2.)

In opposition, Goman represents that he has supplemented all of the interrogatories at issue except form interrogatory number 2.2. (see Opposition, 5-6.)

Meet and Confer Efforts

A motion to compel further responses “shall be accompanied by a meet and confer declaration.”  (Code Civ. Proc., ;; 2030.300, subd. (b)(1).)  The declaration must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion.  (Code Civ. Proc., ; 2016.040.)  “[A] reasonable and good faith attempt at informal resolution entails something more than bickering with [opposing] counsel….  Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.”  (Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.)

Genesis submits the declaration of its counsel, Robert Klein to demonstrate compliance with statutory meet and confer requirements. Klein attests that on November 17, 2020, the parties spent 1.5 hours in a “lengthy” meet and confer and that on November 30, 2020, he wrote a follow-up meet and confer letter to Goman’s counsel regarding this meet and confer discussion. (Klein Decl. ¶ 11.)

In opposition, Goman contends that Genesis has filed to meet and confer in good faith because Genesis rejected Goman’s good faith offer to attend an Informal Discovery Conference (“IDC”) and additionally did not meaningfully discuss the discovery at issue during the parties’ November 17, 2020 telephonic meet and confer discussion. (Opposition, 3-4.) Goman’s counsel, Rebecca Lawlor Calkins (“Calkins”), attests that during the parties’ November 17, 2020 meet and confer discussion, she told Klein that she would consider his requests to supplement Goman’s responses and would provide an update after reviewing the discovery. (Calkins Decl. ¶ 4.) attests that Genesis’ counsel refused her offer of an IDC, stating that he “did not think IDCs are productive.” (Calkins Decl. ¶ 5.)

The court finds the Klein Declaration minimally sufficient for purposes of Code of Civil Procedure section 2030.300. Klein has demonstrated that he engaged in some discussion with Goman’s counsel about which responses Genesis deems insufficient and the reasoning for why the responses are deemed insufficient.

Discussion

1. Legal Authority

On receipt of responses to interrogatories, the propounding party may move for an order compelling a further response if the propounding party deems that an objection is without merit or too general or an answer is evasive or incomplete. (Code Civ. Proc., ; 2030.300, subd. (a)(1)-(3).) The moving party must also include reasons why further answers should be ordered: legal or factual arguments why the answers given were incomplete or nonresponsive, or the objections invalid. (Cal. Rules of Court, rule 3.1345(c).) The responding party has the burden to justify objections in response to a motion filed to compel further responses. (Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.)

1. Timeliness

Pursuant to Code of Civil Procedure section 2030.300, subdivision (c), a motion to compel further responses to interrogatories must be filed within 45 days of service of the verified response, or on or before any specific later date to which the demanding party and the responding party have agreed in writing, with additional time allowed for the manner of service. (Code Civ. Proc., ;; 1013, subd. (a); 2030.300, subd. (c).) The 45-day requirement of Code of Civil Procedure, section 2030.300, subdivision (c) is mandatory and jurisdictional in the sense that it renders the court without authority to rule on a motion to compel further responses to discovery other than to deny the motion. (Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410.)

As discussed above, Goman served his responses to Genesis’ Form Interrogatories on October 23, 2020. Thus, Genesis’ motion to compel deadline was December 14, 2020. Genesis filed the instant motion on December 7, 2020 and thus, the motion is timely.

1. Analysis

1. Notice of Hearing Date

As a preliminary note, Goman contends that Genesis’ motion must be denied in its entirety because Genesis failed to provide notice of the June 3, 2021 hearing date on the instant motions. (Opposition, 4; Calkins Decl. ¶ 7.) In reply, Genesis contends that it did provide sufficient notice. (Reply, 3; Exhibit 1.)

Exhibit 1 to Genesis’ reply is a copy of the parties’ Stipulation and Order continuing the hearings on Genesis’ motions to June 3, 2021. The proof of service indicates that a copy was mailed to Ms. Calkins at her business address. Thus, Genesis provided sufficient notice of the hearing date on the instant motions and the court will not deny the motions on this basis.

1. Form Interrogatories: 2.2, 2.5, 2.11, 12.1, 12.3, 15.1, 17.1

Genesis moves to compel Goman to provide further responses to the following form interrogatories: 2.2, 2.5, 2.11, 12.1, 12.3, 15.1, 17.1. The court will address each interrogatory individually.

No. 2.2: State the date and place of your birth.

Goman objected to this request on the grounds that it is not reasonably calculated to lead to the discovery of admissible evidence and violates his rights to privacy. (Separate Statement in Support of Opposition, 2.)

Genesis contends that a further response to this interrogatory is required because “the date and place of birth help with identification,” as “there is evidence in this case that Ownzones Media was transferring money it received from Genesis Media off shore into Romania.” (Id.) In opposition, Goman contends that no further response is required because a person’s date and place of birth “can be used for a number of illicit activities” and Genesis’ argument regarding Romania is without merit. (Id. at 2-3.)

A further response to this interrogatory is required. The court agrees with Genesis that date and place of birth is basic identifying information and thus, Goman may not refuse to respond on the basis of privacy. Although date and place of birth can be used for “illicit activities,” such a possibility is not grounds for refusing to respond to this interrogatory.

For these reasons, Genesis’ motion is granted as to this interrogatory.

No. 2.5: State: (a) your present residence ADDRESS; (b) your residence ADDRESSES for the past five years; and (c) the dates you lived at each ADDRESS.

Goman objected to this request on the grounds that it is not reasonably calculated to lead to the discovery of admissible evidence and violates his rights to privacy. (Separate Statement in Support of Opposition, 3.)

Genesis contends that a further response to this interrogatory is required because Genesis needs to be able to serve Goman “either during this litigation or after its conclusion.” (Id. at 4.) In opposition, Goman contends that the motion is moot as to this interrogatory because it has been supplemented. (Id.)

Goman represents in its opposition that it has served a supplemental response to this interrogatory. Genesis’ reply does not dispute that supplemental responses were served. Thus, Genesis’ motion is moot as to this interrogatory.

No. 2.11: At the time of the INCIDENT were you acting as an agent or employee for any PERSON? If so, state: (a) the name, ADDRESS, and telephone number of that PERSON; and (b) a description of your duties.

Goman objected to this interrogatory on the grounds that it is vague, ambiguous, overbroad, and improperly seeks disclosure of confidential information. (Separate Statement in Support of Motion, 4-5.) Goman additionally objects that the interrogatory sought to violate his rights to privacy and sought information protected by attorney-client privilege and work-product privilege. (Id.) Subject to these objections, Goman states that he is unable to respond “without a sufficient definition of what “INCIDENT” refers to.” (Id.)

Genesis contends that a further response to this interrogatory is required because INCIDENT “was defined and is easy to understand in this breach of contract case.” (Id. at 5.) In opposition,

Goman contends that no further response is required because he has provided a supplemental response. (Id. at 5-6.)Goman represents in its opposition that it has served a supplemental response to this interrogatory. Genesis’ reply does not dispute that supplemental responses were served. Thus, Genesis’ motion is moot as to this interrogatory.

No. 12.1: State the name, ADDRESS, and telephone number of each individual: (a) who witnessed the INCIDENT or the events occurring immediately before or after the INCIDENT; and (b) who made any statement at the scene of the INCIDENT; (c) who heard any statements made about the INCIDENT by any individual at the scene; (d) who YOU OR ANYONE ACTING ON YOUR BEHALF claim has knowledge of the INCIDENT (except for expert witnesses covered by Code of Civil Procedure section 2034).

Goman represents in its opposition that it has served a supplemental response to this interrogatory. Genesis’ reply does not dispute that supplemental responses were served. Thus, Genesis’ motion is moot as to this interrogatory.

No. 12.3: Have YOU OR ANYONE ACTING ON YOUR BEHALF obtained a written or recorded statement from any individual concerning the INCIDENT? If so, for each statement state: (a) the name, ADDRESS, and telephone number of the individual from whom the statement was obtained; (b) the name, ADDRESS, and telephone number of the individual who obtained statement; (c) the date the statement was obtained; and (d) the name, ADDRESS, and telephone number of each PERSON who has the original statement or a copy.

Goman represents in its opposition that it has served a supplemental response to this interrogatory. Genesis’ reply does not dispute that supplemental responses were served. Thus, Genesis’ motion is moot as to this interrogatory.

No. 15.1: Identify each denial of a material allegation and each special or affirmative defense in your pleadings and for each: (a) state all facts upon which you base the denial or special or affirmative defense; (b) state the names, ADDRESSES, and telephone numbers of all PERSONS who have knowledge of those facts; and (c) identify all DOCUMENTS and other tangible things that support your denial or special or affirmative defense, and state the name, ADDRESS, and telephone number of the PERSON who has each DOCUMENT.

Goman responded to this interrogatory by stating various facts in support of his position and then stating as follows: “Numerous documents support Ownzones and Goman’s denials and affirmative defenses, including but not limited to all documents submitted by Ownzones in support of its Motion for Summary Judgment.” (Separate Statement in Support of Opposition, 12-14.)

Genesis contends that a further response to this interrogatory is required because Goman failed to respond to all subparts of this interrogatory by identifying specific documents and witnesses. (Id. at 14.) In opposition, Goman contends that no further response is required because this interrogatory has been supplemented. (Id. at 15.)

Goman represents in its opposition that it has served a supplemental response to this interrogatory. Genesis’ reply does not dispute that supplemental responses were served. Thus, Genesis’ motion is moot as to this interrogatory.

No. 17.1: Is your response to each request for admission served with these interrogatories an unqualified admission? If not, for each response that is not an unqualified admission: (a) state the number of the request; (b) state all facts upon which you base your response; (c) state the names, ADDRESSES, and telephone numbers of all PERSONS who have knowledge of those facts; and (d) identify all DOCUMENTS and other tangible things that support your response and state the name, ADDRESS, and telephone number of the PERSON who has each DOCUMENT or thing.

Goman represents in its opposition that it has served a supplemental response to this interrogatory. Genesis’ reply does not dispute that supplemental responses were served. Thus, Genesis’ motion is moot as to this interrogatory.

Monetary Sanctions

The court may impose sanctions against any party for engaging in conduct constituting a “misuse of the discovery process.”  (Code Civ. Proc., ; 2023.030 (a).)  Misuse of the discovery process includes “failing to respond or submit to an authorized method of discovery.” (Code Civ. Proc., ; 2023.010 (d).)  

Genesis requests sanctions in the amount of $6,501.65 in connection with this motion. Goman also seeks sanctions against Genesis on the grounds that it has not acted in good faith in meeting and conferring on the instant motion. The court does not award sanctions against either party, as it finds neither party is free from fault in making this dispute reach the court unnecessarily such that sanctions, if awarded, would offset each other.

Conclusion

Genesis’ motion is granted as to interrogatory 2.2 and otherwise denied. Both parties’ requests for sanctions are denied. Goman is to serve verified supplemental responses within 30 days. Genesis is to give notice.

MOTION TO COMPEL FURTHER RESPONSES TO SPECIAL INTERROGATORIES

Request for Judicial Notice

Genesis moves for judicial notice of the following in support of its motion:

1. Securities and Exchange V. Ownzones Media Network et. al. case number 2:20-cv-03108 filed April 2, 2020;

2. Answer by Cross Defendant Genesis Media to Ownzones Media’s first amended cross complaint.

Genesis’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Procedural History

Genesis served Ownzones with Special Interrogatories, Set One on September 21, 2020. (Declaration of Robert G. Klein (“Klein Decl.”), ¶ 8.) Ownzones served its responses on October 23, 2020. (Klein Decl. ¶ 10, Exh. 2.)

Meet and Confer Efforts

A motion to compel further responses “shall be accompanied by a meet and confer declaration.”  (Code Civ. Proc., ;; 2030.300, subd. (b)(1).)  The declaration must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion.  (Code Civ. Proc., ; 2016.040.)  “[A] reasonable and good faith attempt at informal resolution entails something more than bickering with [opposing] counsel….  Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.”  (Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.)

Genesis submits the declaration of its counsel, Robert Klein to demonstrate compliance with statutory meet and confer requirements. Klein attests that on November 17, 2020, the parties spent 1.5 hours in a “lengthy” meet and confer and that on November 30, 2020, he wrote a follow-up meet and confer letter to Ownzones’ counsel regarding this meet and confer discussion. (Klein Decl. ¶ 11.)

In opposition, Ownzones contends that Genesis has filed to meet and confer in good faith because Genesis rejected Ownzones’ good faith offer to attend an Informal Discovery Conference (“IDC”) and additionally did not meaningfully discuss the discovery at issue during the parties’ November 17, 2020 telephonic meet and confer discussion. (Opposition, 3-4.) Ownzones’ counsel, Rebecca Lawlor Calkins (“Calkins”), attests that during the parties’ November 17, 2020 meet and confer discussion, she told Klein that she would consider his requests to supplement Ownzones’ responses and would provide an update after reviewing the discovery. (Calkins Decl. ¶ 4.) attests that Genesis’ counsel refused her offer of an IDC, stating that he “did not think IDCs are productive.” (Calkins Decl. ¶ 5.)

The court finds the Klein Declaration minimally sufficient for purposes of Code of Civil Procedure section 2030.300. Klein has demonstrated that he engaged in some discussion with Ownzones’ counsel about which responses Genesis deems insufficient and the reasoning for why the responses are deemed insufficient.

Discussion

1. Legal Authority

On receipt of responses to interrogatories, the propounding party may move for an order compelling a further response if the propounding party deems that an objection is without merit or too general or an answer is evasive or incomplete. (Code Civ. Proc., ; 2030.300, subd. (a)(1)-(3).) The moving party must also include reasons why further answers should be ordered: legal or factual arguments why the answers given were incomplete or nonresponsive, or the objections invalid. (Cal. Rules of Court, rule 3.1345(c).) The responding party has the burden to justify objections in response to a motion filed to compel further responses. (Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.)

1. Timeliness

Pursuant to Code of Civil Procedure section 2030.300, subdivision (c), a motion to compel further responses to interrogatories must be filed within 45 days of service of the verified response, or on or before any specific later date to which the demanding party and the responding party have agreed in writing, with additional time allowed for the manner of service. (Code Civ. Proc., ;; 1013, subd. (a); 2030.300, subd. (c).) The 45-day requirement of Code of Civil Procedure, section 2030.300, subdivision (c) is mandatory and jurisdictional in the sense that it renders the court without authority to rule on a motion to compel further responses to discovery other than to deny the motion. (Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410.)

As discussed above, Ownzones served its responses to Genesis’ Special Interrogatories on October 23, 2020. Thus, Genesis’ motion to compel deadline was December 14, 2020. Genesis filed the instant motion on December 7, 2020 and thus, the motion is timely.

1. Analysis

1. Notice of Hearing Date

As a preliminary note, Ownzones contends that Genesis’ motion must be denied in its entirety because Genesis failed to provide notice of the June 3, 2021 hearing date on the instant motions. (Opposition, 4; Calkins Decl. ¶ 7.) In reply, Genesis contends that it did provide sufficient notice. (Reply, 3; Exhibit 1.)

Exhibit 1 to Genesis’ reply is a copy of the parties’ Stipulation and Order continuing the hearings on Genesis’ motions to June 3, 2021. The proof of service indicates that a copy was mailed to Ms. Calkins at her business address. Thus, Genesis provided sufficient notice of the hearing date on the instant motions and the court will not deny the motions on this basis.

1. Special Interrogatories: 18-35

Genesis moves to compel a further response to Special Interrogatories 18-35 from Ownzones. These interrogatories ask Ownzones to provide information about its investors, stocks, and other facts pertinent to the Securities and Exchange Commission’s (“SEC”) April 2, 2020 Complaint against Ownzones, entitled Securities and Exchange Commission v. Ownzones Media Network, Inc. ; Dan Goman et. al. Case number 2:20- cv-03108 (“SEC Complaint”).

For example, Genesis’ Special Interrogatory number 18 asked Ownzones to identify all “PERSONS who YOU offered Series A stock in Ownzones Media Network Inc. 3 from July 2011 through the present.” (Separate Statement in Support of Motion, 2.) As an additional example, Special Interrogatory number 25 asks Ownzones to “IDENTIFY all PERSONS who ever invested money in Ownzones Media Network.” (Id., 8.) Ownzones’ response to each interrogatory consists only of objections.

According to Genesis, a further response to each interrogatory is required because each interrogatory is relevant to Genesis’ claim that Goman is the alter ego of Ownzones and on Genesis’ unclean hands affirmative defense. (Motion, 5.) Genesis argues that this information could also be relevant as character and impeachment evidence, because there is “usually evidence” to support the SEC’s allegations. (Motion, 5.)

In opposition, Ownzones contends that no further responses to any of these interrogatories are required because each interrogatory is not reasonably calculated to lead to the discovery of admissible evidence. (Opposition, 5-7.) Specifically, Ownzones contends that this is because these interrogatories seek discovery regarding the SEC Complaint, and Genesis has cited to no authority in support of its argument that discovery about the facts of another matter is relevant to the facts in this action. (Opposition, 5-7.) Additionally, Ownzones contends that Genesis’ unclean hands argument fails because the doctrine of unclean hands only applies to misconduct directly related to the matter. (Opposition, 7-8.)

In reply, Genesis contends that a further response to each interrogatory is required because all of Ownzones’ investors, principals, employees and independent contractors are allegedly potential witnesses. (Reply, 5.) Additionally, Genesis contends that this discovery is relevant because Ownzones has put its “reputation” on the line and thus, a judgment in favor of the SEC goes to Ownzones’ “reputation.” (Reply, 6.)

The court has reviewed the special interrogatories at issue in this motion and agrees with Ownzones that each interrogatory is not reasonably calculated to lead to the discovery of admissible evidence. There is no allegation in this action that Ownzones improperly issued series A or B stock, that there was any improper conduct with regard to Ownzones’ investors, or that there was any improper conduct with these investors’ investments. Instead, the instant action pertains to the parties’ rights and responsibilities under the Agreement, which the parties entered into in 2017. Thus, these interrogatories are also overbroad as to time, as these ask Ownzones to produce information going back to 2011 or without any time limitation.

Finally, Ownzones is also correct that the unclean hands doctrine is limited to improper conduct that directly relates to the conduct at issue in this action. (see Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 974.) The SEC complaint includes no allegations regarding the Agreement at issue in this action and thus, Genesis’ argument that the instant discovery is relevant to its unclean hands defense fails.

For these reasons, Genesis’ motion is denied.

Monetary Sanctions

The court may impose sanctions against any party for engaging in conduct constituting a “misuse of the discovery process.”  (Code Civ. Proc., ; 2023.030 (a).)  Misuse of the discovery process includes “failing to respond or submit to an authorized method of discovery.” (Code Civ. Proc., ; 2023.010 (d).)  

Genesis requests sanctions in the amount of $6,501.65 in connection with this motion. Ownzones also seeks sanctions against Genesis in connection with its conduct in filing this motion. Having denied Genesis’ motion, Genesis’ request for sanctions is also denied. The court also does not award sanctions against Genesis, as it finds that Genesis acted with substantial justification such that sanctions are not warranted.

Conclusion

Genesis’ motion is denied. Both parties’ requests for sanctions are also denied. Ownzones is to give notice.

MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR PRODUCTION

Request for Judicial Notice

Genesis moves for judicial notice of the following in support of its motion:

1. Securities and Exchange V. Ownzones Media Network et. al. case number 2:20-cv-03108 filed April 2, 2020;

2. Answer by Cross Defendant Genesis Media to Ownzones Media’s first amended cross complaint.

Genesis’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Procedural History

Genesis served Goman with Requests for Production, Set One on September 21, 2020. (Declaration of Robert G. Klein (“Klein Decl.”), ¶ 8.) Goman served his responses on October 23, 2020. (Klein Decl. ¶ 10, Exh. 2.)

Meet and Confer Efforts

A motion to compel further responses “shall be accompanied by a meet and confer declaration.”  (Code Civ. Proc., ;; 2031.310, subd. (b)(2).)  The declaration must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion.  (Code Civ. Proc., ; 2016.040.)  “[A] reasonable and good faith attempt at informal resolution entails something more than bickering with [opposing] counsel….  Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.”  (Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.)  

Genesis submits the declaration of its counsel, Robert Klein to demonstrate compliance with statutory meet and confer requirements. Klein attests that on November 17, 2020, the parties spent 1.5 hours in a “lengthy” meet and confer and that on November 30, 2020, he wrote a follow-up meet and confer letter to Goman’s counsel regarding this meet and confer discussion. (Klein Decl. ¶ 11.)

In opposition, Goman contends that Genesis has filed to meet and confer in good faith because Genesis rejected Goman’s good faith offer to attend an Informal Discovery Conference (“IDC”) and additionally did not meaningfully discuss the discovery at issue during the parties’ November 17, 2020 telephonic meet and confer discussion. (Opposition, 3-4.) Goman’s counsel, Rebecca Lawlor Calkins (“Calkins”), attests that during the parties’ November 17, 2020 meet and confer discussion, she told Klein that she would consider his requests to supplement Goman’s responses and would provide an update after reviewing the discovery. (Calkins Decl. ¶ 4.) attests that Genesis’ counsel refused her offer of an IDC, stating that he “did not think IDCs are productive.” (Calkins Decl. ¶ 5.)

The court finds the Klein Declaration minimally sufficient for purposes of Code of Civil Procedure section 2031.310. Klein has demonstrated that he engaged in some discussion with Goman’s counsel about which responses Genesis deems insufficient and the reasoning for why the responses are deemed insufficient.

Discussion

1. Legal Authority

On receipt of responses to requests for production, the propounding party may move for an order compelling a further response if the propounding party deems that a statement of compliance is incomplete, a representation of inability to comply is inadequate, incomplete, or evasive, or an objection in the response is without merit. (See Code Civ. Proc., ;; 2030.310, subd. (a)(1)-(3).) The moving party must also include reasons why further answers should be ordered: legal or factual arguments why the answers given were incomplete or nonresponsive, or the objections invalid. (Cal. Rules of Court, rule 3.1345(c).) The responding party has the burden to justify objections in response to a motion filed to compel further responses. (Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 255.)

1. Timeliness

Pursuant to Code of Civil Procedure section 2031.310, subdivision (c), a motion to compel further responses to inspection demands must be filed within 45 days of service of the verified response, or on or before any specific later date to which the demanding party and the responding party have agreed in writing, with additional time allowed for the manner of service. (Code Civ. Proc., ;; 1013, subd. (a); 2031.310, subd. (c).) The 45-day requirement of Code of Civil Procedure, section 2031.310, subdivision (c) is mandatory and jurisdictional in the sense that it renders the court without authority to rule on a motion to compel further responses to discovery other than to deny the motion. (Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410.)

As discussed above, Ownzones served its responses to Genesis’ Requests for Production on October 23, 2020. Thus, Genesis’ motion to compel deadline was December 14, 2020. Genesis filed the instant motion on December 7, 2020 and thus, the motion is timely.

1. Analysis

    

1. Notice of Hearing Date

As a preliminary note, Ownzones contends that Genesis’ motion must be denied in its entirety because Genesis failed to provide notice of the June 3, 2021 hearing date on the instant motions. (Opposition, 3-4; Calkins Decl. ¶ 7.) In reply, Genesis contends that it did provide sufficient notice. (Reply, 8; Exhibit 1.)

Exhibit 1 to Genesis’ reply is a copy of the parties’ Stipulation and Order continuing the hearings on Genesis’ motions to June 3, 2021. The proof of service indicates that a copy was mailed to Ms. Calkins at her business address. Thus, Genesis provided sufficient notice of the hearing date on the instant motions and the court will not deny the motions on this basis.

1. Requests for Production Numbers 1-31

Genesis moves for an order compelling further responses to each of the following requests: 1-31.

These requests ask Ownzones to provide information about its investors, stocks, and other documents pertinent to the Securities and Exchange Commission’s (“SEC”) April 2, 2020 Complaint against Ownzones, entitled Securities and Exchange Commission v. Ownzones Media Network, Inc. ; Dan Goman et. al. Case number 2:20- cv-03108 (“SEC Complaint”).

For example, Genesis’ request number 4 asked Ownzones to produce all “DOCUMENTS that evidence Ownzones’ capitalization from 2011 to present, including all capitalization tables.” As an additional example, request number 16 asks Ownzones to produce documents evidencing “all communications between YOU and any venture capitalist from 2011 to present.” Ownzones’ response to each interrogatory consists only of objections.

According to Genesis, a further response to each request is required because each request is relevant to Genesis’ claim that Goman is the alter ego of Ownzones and on Genesis’ unclean hands affirmative defense. (Motion, 5.) Genesis argues that this information could also be relevant as character and impeachment evidence. (Motion, 5.)

In opposition, Ownzones contends that no further responses to any of these requests are required because each request is not reasonably calculated to lead to the discovery of admissible evidence. (Opposition, 6-10.) Additionally, Ownzones contends that further responses are not required because these requests are duplicative of previous requests Genesis has already propounded, for which the motion to compel deadline has passed. Specifically, Ownzones contends that this is because these requests seek discovery regarding the SEC Complaint, and Genesis has cited to no authority in support of its argument that discovery about the facts of another matter is relevant to the facts in this action. (Id.) Additionally, Ownzones contends that Genesis’ unclean hands argument fails because the doctrine of unclean hands only applies to misconduct directly related to the matter. (Opposition, 6-7.)

In reply, Genesis contends that a further response to each interrogatory is required because all of Ownzones’ investors, are potential witnesses and Genesis has had to disclose its own investors. (Reply, 13.) Additionally, Genesis contends that this discovery is relevant because Ownzones has put its “reputation” on the line and thus, a judgment in favor of the SEC goes to Ownzones’ “reputation.” (Reply, 2.)

The court has reviewed the requests at issue in this motion and agrees with Ownzones that each request is not reasonably calculated to lead to the discovery of admissible evidence. There is no allegation in this action that Ownzones improperly issued series A or B stock, that there was any improper conduct with regard to Ownzones’ investors, or that there was any improper conduct with these investors’ investments. Instead, the instant action pertains to the parties’ rights and responsibilities under the Agreement, which the parties entered into in 2017. Thus, these interrogatories are also overbroad as to time, as these ask Ownzones to produce information going back to 2011 or without any time limitation.

Finally, Ownzones is also correct that the unclean hands doctrine is limited to improper conduct that directly relates to the conduct at issue in this action. (see Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 974.) The SEC complaint includes no allegations regarding the Agreement at issue in this action and thus, Genesis’ argument that the instant discovery is relevant to its unclean hands defense fails.

For these reasons, Genesis’ motion is denied.

Monetary Sanctions

The court may impose sanctions against any party for engaging in conduct constituting a “misuse of the discovery process.”  (Code Civ. Proc., ; 2023.030 (a).)  Misuse of the discovery process includes “failing to respond or submit to an authorized method of discovery.” (Code Civ. Proc., ; 2023.010 (d).)  

Genesis requests sanctions in the amount of $6,501.65 in connection with this motion. Ownzones also seeks sanctions against Genesis in connection with its conduct in filing this motion. Having denied Genesis’ motion, Genesis’ request for sanctions is also denied. The court also does not award sanctions against Genesis, as it finds that Genesis acted with substantial justification such that sanctions are not warranted.

Conclusion

Genesis’ motion is denied. Both parties’ requests for sanctions are also denied. Ownzones is to give notice.

MOTION TO COMPEL FURTHER RESPONSES TO REQUESTS FOR ADMISSION

Request for Judicial Notice

Genesis moves for judicial notice of the following in support of its motion:

1. Securities and Exchange V. Ownzones Media Network et. al. case number 2:20-cv-03108 filed April 2, 2020;

2. Answer by Cross Defendant Genesis Media to Ownzones Media’s first amended cross complaint.

Genesis’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Procedural History

Genesis served Goman with Requests for Admission, Set One on September 21, 2020. (Declaration of Robert G. Klein (“Klein Decl.”), ¶ 8.) Goman served his responses on October 23, 2020. (Klein Decl. ¶ 10, Exh. 2.)

In opposition, Goman represents that he has supplemented all of the interrogatories at issue except form interrogatory number 2.2. (see Opposition, 5-6.)

Meet and Confer Efforts

A motion to compel further responses to requests for admission “shall be accompanied by a meet and confer declaration.”  (Code Civ. Proc., ; 2033.290, subd. (b)(1).)  The declaration must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion.  (Code Civ. Proc., ; 2016.040.)  “[A] reasonable and good faith attempt at informal resolution entails something more than bickering with [opposing] counsel….  Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.”  (Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.)

Genesis submits the declaration of its counsel, Robert Klein to demonstrate compliance with statutory meet and confer requirements. Klein attests that on November 17, 2020, the parties spent 1.5 hours in a “lengthy” meet and confer and that on November 30, 2020, he wrote a follow-up meet and confer letter to Goman’s counsel regarding this meet and confer discussion. (Klein Decl. ¶ 11.)

In opposition, Goman contends that Genesis has filed to meet and confer in good faith because Genesis rejected Goman’s good faith offer to attend an Informal Discovery Conference (“IDC”) and additionally did not meaningfully discuss the discovery at issue during the parties’ November 17, 2020 telephonic meet and confer discussion. (Opposition, 2-3.) Goman’s counsel, Rebecca Lawlor Calkins (“Calkins”), attests that during the parties’ November 17, 2020 meet and confer discussion, she told Klein that she would consider his requests to supplement Goman’s responses and would provide an update after reviewing the discovery. (Calkins Decl. ¶ 4.) attests that Genesis’ counsel refused her offer of an IDC, stating that he “did not think IDCs are productive.” (Calkins Decl. ¶ 5.)

The court finds the Klein Declaration minimally sufficient for purposes of Code of Civil Procedure section 2033.290. Klein has demonstrated that he engaged in some discussion with Goman’s counsel about which responses Genesis deems insufficient and the reasoning for why the responses are deemed insufficient.

Discussion

1. Legal Authority

“Any party may obtain discovery . . . by a written request that any other party to the action admit the genuineness of specified documents, or the truth of specified matters of fact, opinion relating to fact, or application of law to fact. A request for admission may relate to a matter that is in controversy between the parties.”  (Code Civ. Proc., ; 2033.010.)  “Within 30 days after service of requests for admission, the party to whom the requests are directed shall serve the original of the response to them on the requesting party, and a copy of the response on all other parties who have appeared . . . .”  (Code Civ. Proc., ; 2033.250(a).)

“[O]n receipt of a response to requests for admissions,” the propounding party may move for an order compelling a further response if it deems that “either or both of the following apply: (1) an answer to a particular request is evasive or incomplete, (2) an objection to a particular request is without merit or too general.” (Code Civ. Proc. ; 2033.290, subd. (a).)

1. Timeliness of Motions

Pursuant to Code of Civil Procedure section 2033.290, subdivision (c) a motion to compel further responses to requests for admission must be filed within 45 days of service of the verified response, or on or before any specific later date to which the demanding party and the responding party have agreed in writing, with additional time allowed for the manner of service. (Code Civ. Proc., ;; 1013, subd. (a); 2033.290, subd. (c).) The 45-day requirement of Code of Civil Procedure, section 2031.310, subdivision (c) is mandatory and jurisdictional in the sense that it renders the court without authority to rule on a motion to compel further responses to discovery other than to deny the motion. (Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410 (Sexton).)

As discussed above, Goman served his responses to Genesis’ Requests for Admission on October 23, 2020. Thus, Genesis’ motion to compel deadline was December 14, 2020. Genesis filed the instant motion on December 7, 2020 and thus, the motion is timely.

1. Analysis

Genesis moves to compel a further response to requests numbers 1, 6, 8, 9-17, 19-31.

First, Genesis’ request number 1 asks that Goman admit as follows: “Ownzones Media Network, Inc. is an entertainment-technology company.”

On May 20, 2021, Goman served a supplemental response to this request. (Reply, Exh. 1.) Thus, because Genesis’ motion pertains to Goman’s original responses, the motion is moot as to this request.

Second, Genesis’ remaining requests ask that Goman admit various facts identified about its investors, stocks, and other documents pertinent to the Securities and Exchange Commission’s (“SEC”) April 2, 2020 Complaint against Ownzones, entitled Securities and Exchange Commission v. Ownzones Media Network, Inc. ; Dan Goman et. al. Case number 2:20- cv-03108 (“SEC Complaint”).

For example, Genesis’ request number 4 asked Goman to admit that “Dan Goman is the largest shareholder of Ownzones Media Networks.” As an additional example, request number 19 asks Goman to admit that “Starting in approximately March 2016, Dan Goman authorized his brother Joseph Goman to present information about Ownzones Media Networks to both existing and prospective investors.”

According to Genesis, a further response to each request is required because each request is relevant to Genesis’ claim that Goman is the alter ego of Ownzones and on Genesis’ unclean hands affirmative defense. (Motion, 5-6.) Genesis argues that this information could also be relevant as character and impeachment evidence. (Motion, 5-6.)

In opposition, Goman contends that no further responses to any of these requests are required because each request is not reasonably calculated to lead to the discovery of admissible evidence. (Opposition, 3-7.) Specifically, Ownzones contends that this is because these requests seek discovery regarding the SEC Complaint, and Genesis has cited to no authority in support of its argument that discovery about the facts of another matter is relevant to the facts in this action. (Id.) Additionally, Ownzones contends that Genesis’ unclean hands argument fails because the doctrine of unclean hands only applies to misconduct directly related to the matter. (Id.) Finally, Goman contends that the motion is moot because all responses have been supplemented. (Id., 8.)

In reply, Genesis contends that a further response to each interrogatory is required because all of Ownzones’ investors, are potential witnesses and Genesis has had to disclose its own investors. (Reply, 7-8.) Additionally, Genesis contends that this discovery is relevant because Ownzones has put its “reputation” on the line and thus, a judgment in favor of the SEC goes to Ownzones’ “reputation.” (Reply, 3-4.)

The court has reviewed the requests at issue in this motion and agrees with Ownzones that each request is not reasonably calculated to lead to the discovery of admissible evidence. There is no allegation in this action that Ownzones improperly issued series A or B stock, that there was any improper conduct with regard to Ownzones’ investors, or that there was any improper conduct with these investors’ investments. Instead, the instant action pertains to the parties’ rights and responsibilities under the Agreement, which the parties entered into in 2017. Thus, these interrogatories are also overbroad as to time, as these ask Goman to produce information going back to 2011 or without any time limitation.

Finally, Goman is also correct that the unclean hands doctrine is limited to improper conduct that directly relates to the conduct at issue in this action. (see Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 974.) The SEC complaint includes no allegations regarding the Agreement at issue in this action and thus, Genesis’ argument that the instant discovery is relevant to its unclean hands defense fails.

For these reasons, Genesis’ motion is denied.

Monetary Sanctions

The court may impose sanctions against any party for engaging in conduct constituting a “misuse of the discovery process.”  (Code Civ. Proc., ; 2023.030 (a).)  Misuse of the discovery process includes “failing to respond or submit to an authorized method of discovery.” (Code Civ. Proc., ; 2023.010 (d).)  

Genesis requests sanctions in the amount of $6,501.65 in connection with this motion. Goman also seeks sanctions against Genesis in connection with its conduct in filing this motion. Having denied Genesis’ motion, Genesis’ request for sanctions is also denied. The court also does not award sanctions against Genesis, as it finds that Genesis acted with substantial justification such that sanctions are not warranted.

Conclusion

Genesis’ motion is denied. Both parties’ requests for sanctions are also denied. Goman is to give notice.

Case Number: ****6021    Hearing Date: May 13, 2021    Dept: 37

HEARING DATE: May 13, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

MOVING PARTIES: Defendants and Cross-Complainants Ownzones Media Network, Inc.

OPPOSING PARTIES: Plaintiffs and Cross-Defendants Genesis Media, LLC, Howard Misle, Meghan Konecne, Belmeko LLC; Non-Parties Alex Nahai and Nahai Consulting Services, Inc.

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: OK

MOTION: Cross-Complainants’ Motion for Leave to File Second Amended Cross-Complaint

OPPOSITION: April 29, 2021 (Plaintiffs and Cross-Defendants), April 30, 2021 (Nahai Parties)

REPLY: May 6, 2021

TENTATIVE: Ownzones’ motion is granted. Ownzones to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.  

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman. 

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.  

On December 5, 2018, Ownzones and Goman (“Cross-Complainants”) filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.  

On March 3, 2020, Ownzones and Goman filed amendments to their cross-complaint, naming Alex Nahai (“Nahai”) and Alex Nahai Consulting (“ANCS”) as roes 3 and 4. On December 28, 2020, Nahai an ANCS’ motion to strike these roe amendments was granted, and the roe amendments were stricken. In ruling on Nahai and ANCS’ motion to strike roe amendments, the court specifically noted that “[b]ased on the descriptions of Nahai and ANCS’ conduct in the proposed cross-complaint, the court is not persuaded by Ownzones and Goman’s attempt to draw a distinction between merely knowing of Nahai and ANCS’ identities and knowing “actual facts” which give rise to their potential liability as cross-defendants.” (see December 28, 2020 Minute Order).

On April 14, 2021, the court denied Ownzones’s first Motion for Leave to Amend on the grounds that service of the motion was insufficient.

On April 19, 2021, Onwzones filed the instant Motion for Leave to Amend (“Second Motion”) Nahai and ANCS (“Nahai Parties”) oppose the motion. Plaintiffs Genesis, Howard Misle (“Misle”), Meghan Konecne (“Konecne”) and Belmeko LLC (“Belmeko”) (“Plaintiffs”) also oppose the motion.

Evidentiary Objections

Nahai Parties’ Objections to Declaration of Rebecca Lawlor Calkins

Overruled: 1-4, 6-7

Sustained in Part: 5, 8

Objection 5: sustained in part as to “Nahai’s and cross-defendants’ embezzlement of Genesis investors’ funds.”

Objection 8: sustained-in-part as to “While Nahai’s production is still likely incomplete

Request for Judicial Notice

Genesis requests that the court take judicial notice of the following in support of its opposition:

1. Complaint in the case of Ownzones Media Network v. Alex Nahai; Alex Nahai Consulting filed as case number 21STCV09553;

2. Complaint filed by the Securities and Exchange Commission in the case of Securities and Exchange Commission v. Ownzones Media Network; Dan Goman; and Joseph Goman case number 2:20-cv-03108 filed April 20, 2020;

3. Final Judgment against Ownzones Media Network, Inc. in Securities and Exchange Commission v. Ownzones Media Network; Dan Goman; and Joseph Goman case number 2:20-cv-03108;

4. Final Judgment against Dan Goman in Securities and Exchange Commission v. Ownzones Media Network; Dan Goman; and Joseph Goman case number 2:20-cv-03108;

Additionally, the Nahai Parties request that the court take judicial notice of the following in support of their opposition:

1. Complaint, Securities and Exchange Commission v. Ownzones Media Network, Inc., Dan Goman, and Joseph Goman (“SEC v. Ownzones”), Case No. 2:20-cv-03108, (C.D. Cal. Apr. 2, 2020), Dkt. No. 1;

2. Final Judgment as to Ownzones Media Network, Inc., SEC v. Ownzones Case No. 2:20-cv-03108, Dkt. No. 45 (C.D. Cal. Jan. 13, 2021);

3. Final Judgment as to Dan Goman, SEC v. Ownzones, Case No. 2:20-cv03108, Dkt. No. 46 (C.D. Cal. Jan. 13, 2021);

4. Final Judgment as to Joseph Goman, SEC v. Ownzones, No. 2:20-cv-03108, Dkt. No. 51 (C.D. Cal. Mar. 17, 2021);

5. Notice of Entry of Findings of Fact, Conclusions of Law and Judgment, Genesis Media, LLC v. Joseph Gugluizza, Academy Global Investments, LLC, Case No. A-19-800421-B (Nev. 8th J. Dist. Ct. Dec. 8, 2020).

Genesis and the Nahai Parties’ requests are granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Discussion

1. Legal Standard 

California law holds that leave to amend is to be granted liberally, to accomplish substantial justice for both parties.  (Code Civ. Proc., ; 473, subd. (a); Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488-489 (Hirsa)) “Assuming proper notice, the trial court has wide discretion in determining whether to allow the amendment, but the appropriate exercise of that discretion requires the trial court to consider a number of factors: ‘including the conduct of the moving party and the belated presentation of the amendment.   

The law is well settled that a long-deferred presentation of the proposed amendment without a showing of excuse for the delay is itself a significant factor to uphold the trial court's denial of the amendment.”  (Leader v. Health Ind. of America, Inc. (2001) 89 Cal.App.4th 603, 613.)  “If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend….”  (Morgan v. Sup. Ct. (1959) 172 Cal.App.2d 527, 530.)  Prejudice includes “delay in trial, loss of critical evidence, or added costs of preparation.”  (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448.)  “The power to permit amendments is interpreted very liberally as long as the plaintiff does not attempt to state facts which give rise to a wholly distinct and different legal obligation against the defendant.”  (Herrera v. Superior Court (1984) 158 Cal.App.3d 255, 259.)  The court, however, has the discretion to deny an amendment that fails to state a cause of action or defense.  (Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 230.) 

1. Analysis

1. Procedural Considerations 

   A party requesting leave to amend must comply with California Rules of Court, rule 3.1324.  A motion to amend a pleading before trial must state which allegations were deleted from and which allegations were added to the previous pleading and identify the changes “by page, paragraph, and line number.”  (Cal. Rules of Court, rule 3.1324(a).)  

   Cross-Complainants seek leave to file a SACC in order to add the Nahai Parties as Cross-Defendants for all causes of action. (Motion, 9-10.) The proposed SACC also adds claims for negligent and intentional misrepresentation against Genesis, Misle, Nahai and ANCS. (Id.) Cross-Complainants also submit a redline copy of the proposed SACC. (Declaration of Rebecca Lawlor Calkins (“Calkins Decl.”), Exh B.)

   Cross-Complainants have demonstrated compliance with California Rules of Court, rule 3.1324 (a).

   Additionally, “[a] separate declaration must accompany the motion and must specify: (1) The effect of the amendment; (2) Why the amendment is necessary and proper; (3) When the facts giving rise to the amended allegations were discovered; and (4) The reasons why the request for amendment was not made earlier.”  (Cal. Rules of Court, rule 3.1324(b).)  

   Cross-Complainants submit a declaration from their counsel, Rebecca Lawlor Calkins in support of the instant motion. Calkins attests that the effect of the proposed SACC is to add the Nahai Parties as Cross-Defendants and to add claims for intentional misrepresentation and negligent misrepresentation as to Cross-Defendants Misle and Genesis. (Calkins Decl. ¶ 7.) Further, Calkins attests that the amendments are proper because Ownzones “runs the risk of forfeiting these claims” or will be forced to file new lawsuits to assert these claims if the motion is not granted. (Calkins Decl. ¶ 8.) Additionally, Calkins attests that the amendments adding the Nahai Parties are proper because the Nahai Parties allegedly stipulated during the hearing on Ownzones’ First Motion that they are parties to the action. (Calkins Decl. ¶¶ 9-10, Exh. C.) As to the timing of the amendment, Cross-Complainants contend that they tried to timely name the Nahai parties as Roe Cross-Defendants and the granting of the motion to quash made an amended Cross-Complaint naming them as the appropriate method for stating the claims against them.

   The Calkins Declaration is sufficient for purposes of California Rules of Court rule 3.1324(b).

2. Substantive Considerations ;

   Generally, motions for leave to amend will be granted unless the party seeking to amend has been dilatory in bringing the proposed amendment before the court and the delay in seeking leave to amend will cause prejudice to the opposing party. ; (See ;Atkinson v. Elk Corp. ;(2003) ;109 Cal.App.4th 739, 761 [“ ‘[I]t is an abuse of discretion to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.’ [Citations.] ; Furthermore, ‘it is irrelevant that new legal theories are introduced as long as the proposed amendments “relate to the same general set of facts.” [Citation.]’ ”]; ;Hirsa, ;supra, ;118 Cal.App.3d at p. 490.) ; Indeed, “courts are much more critical of proposed amendments ... when offered after long unexplained delay or on the eve of trial [citations], or where there is a lack of diligence, or there is prejudice to the other party [citations].” ; (Permalab-Metalab ;Equipment Corp. v. Maryland ;Cas. Co. ;(1972) 25 Cal.App.3d 465, 472.) ; ; ;

   Ownzones contends that leave to amend should be granted for the following reasons: (1) Ownzones has discovered new facts in support of the Nahai’s liability in allegedly embezzling funds, (2) Nahai will not be prejudiced by filing to the SACC because Ownzones can simply initiate another action against Nahai, (3) adding causes of action as to the remaining cross-defendants should be permitted because they are based on entirely separate facts from the facts at issue in Genesis and Misle’s motion for summary adjudication. (Motion, 11-14.)

   In opposition, the Nahai Parties contend that leave to amend should be denied because Ownzones has unreasonably delayed in bringing the instant motion as it was filed 3 months after the Nahai Parties’ motion to strike roe amendments was granted. (Opposition, 3-5.) Additionally, the Nahai Parties contend that the motion should be denied because the SACC is fatally defective. (Opposition, 5-6.) Finally, the Nahai Parties contend that the instant motion should be denied because permitting leave to amend would be in contradiction to the court’s December 28, 2020 order granting Nahai’s motion to strike and the January 27, 2021 order granting Genesis’ motion for summary adjudication in part. (Nahai Opposition, 6-7.)

   Additionally, Plaintiffs oppose Ownzones’ motion on the following grounds: (1) Ownzones’ motion should be denied because the causes of action asserted against Plaintiffs are a restatement of those dismissed on January 27, 2021, (2) Ownzones’ fraud causes of action are insufficiently pled as they are not alleged with the required specificity. (Plaintiffs Opposition, 3-6.) Plaintiffs also contend that Ownzones’ motion should be denied because permitting leave to amend would cause unreasonable delay and prejudice Plaintiffs. (Plaintiffs Opposition, 11.)

   In reply, Ownzones contends that there has not be unreasonable delay in bringing the instant motion because there was only a four-month gap between the case becoming at issue on June 24, 2019 and Ownzones’ filing of its FACC and roe amendments. (Reply, 1-2.) Ownzones argues that any allegedly remaining delay can be contributed to the COVID-19 pandemic, the Nahai Parties’ motion to strike roe amendments and Genesis’ multiple attempts to amend its Complaint. (Id.)

   On motions to amend pleadings, the court is aware that it has discretion to evaluate the merits of the amended pleading, but it also has discretion to allow the amended pleading if otherwise appropriate and then consider challenges to the sufficiency of the pleading by demurrers or motions. This avoids the situation in this case where the moving party feels compelled to submit new evidence with the reply and the opposing party then seeks a sur-reply. The challenges to the pleading are more sensibly addressed after an amended pleading is filed. In addition, an amended pleading is not inconsistent with striking a roe amendment due to knowledge of the party at the time the complaint was filed. So long as the statute of limitations has not passed, the amended pleading is an appropriate response to striking a roe amendment.

   Based on the principles of law regarding amendments set forth above, the court grants Cross-Complainants motion to file the Second Amended Cross-Complaint, which must be filed and serve within five court days.

   The court is concerned that permitting Ownzones to add the Nahai Parties could cause substantial delay because the Nahai Parties require time to conduct their own discovery and potentially file substantive motions. Accordingly, the court orders that any motions or demurrers challenging the substance of the Second Amended Cross-Complaint, if any, be filed within 30 days of service the amended Cross-Complaint. The parties are ordered to get hearing dates from CRS and, upon filing the demurrers and/or motions, to submit within three court days stipulations or ex parte applications to advance the hearing dates, and the court will set the hearings within 30 days of receiving the stipulation or application.

   Conclusion

   Ownzones’ motion is granted. Ownzones to give notice.

Case Number: ****6021    Hearing Date: April 14, 2021    Dept: 37

HEARING DATE: April 14, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

MOVING PARTIES: Defendants and Cross-Complainants, Dan Goman and Ownzones Media Network, Inc.

OPPOSING PARTIES: Plaintiffs and Cross-Defendants Genesis Media, LLC, Howard Misle, Meghan Konecne, Belmeko LLC

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: INSUFFICIENT

MOTION: Cross-Complainants’ Motion for Leave to File Second Amended Cross-Complaint

OPPOSITION: April 1, 2021

REPLY: April 7, 2021

TENTATIVE: Cross-Complainants’ motion is denied. Plaintiffs are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.  

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman. 

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.  

On December 5, 2018, Ownzones and Goman (“Cross-Complainants”) filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.  

On March 3, 2020, Ownzones and Goman filed amendments to their cross-complaint, naming Alex Nahai (“Nahai”) and Alex Nahai Consulting (“ANCS”) as roes 3 and 4. On December 28, 2020, Nahai an ANCS’ motion to strike these roe amendments was granted, and the roe amendments were stricken. In ruling on Nahai and ANCS’ motion to strike roe amendments, the court specifically noted that “[b]ased on the descriptions of Nahai and ANCS’ conduct in the proposed cross-complaint, the court is not persuaded by Ownzones and Goman’s attempt to draw a distinction between merely knowing of Nahai and ANCS’ identities and knowing “actual facts” which give rise to their potential liability as cross-defendants.” (see December 28, 2020 Minute Order).

Cross-Complainants now moves for leave to file a Second Amended Cross Complaint. (“SACC”) Plaintiffs Genesis, Howard Misle (“Misle”), Meghan Konecne (“Konecne”) and Belmeko LLC (“Belmeko”) (“Plaintiffs”) oppose the motion.

Discussion

1. Legal Standard 

California law holds that leave to amend is to be granted liberally, to accomplish substantial justice for both parties.  (Code Civ. Proc., ; 473, subd. (a); Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488-489 (Hirsa)) “Assuming proper notice, the trial court has wide discretion in determining whether to allow the amendment, but the appropriate exercise of that discretion requires the trial court to consider a number of factors: ‘including the conduct of the moving party and the belated presentation of the amendment.   

The law is well settled that a long-deferred presentation of the proposed amendment without a showing of excuse for the delay is itself a significant factor to uphold the trial court's denial of the amendment.”  (Leader v. Health Ind. of America, Inc. (2001) 89 Cal.App.4th 603, 613.)  “If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend….”  (Morgan v. Sup. Ct. (1959) 172 Cal.App.2d 527, 530.)  Prejudice includes “delay in trial, loss of critical evidence, or added costs of preparation.”  (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448.)  “The power to permit amendments is interpreted very liberally as long as the plaintiff does not attempt to state facts which give rise to a wholly distinct and different legal obligation against the defendant.”  (Herrera v. Superior Court (1984) 158 Cal.App.3d 255, 259.)  The court, however, has the discretion to deny an amendment that fails to state a cause of action or defense.  (Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 230.) 

1. Analysis

1. Procedural Considerations 

   Plaintiffs object to the notice given for this motion. It was electronically served 16 court days before the hearing. However, any period of time for service or response is extended by two days if electronically served. (Code Civ. Proc., ; 1010.6, subd. (a)(4)(B).) Cross-Complainant argues that the Court’s general order regarding the pandemic requires parties to treat electronic service as personal service. (Reply, 8:9-24.) The reply purports to quote paragraph 17 of Judge Brazile’s Order, but the omissions and deletions from the quoted language change the meaning of that paragraph, which does not say that electronic service is personal service. Additionally, the amendments to Code of Civil Procedure section 1010.6, which became effective January 1, 2021, remove any doubt. Accordingly, the court sustains Plaintiff’s objection to the notice given for this motion.

   In addition, a party requesting leave to amend must comply with California Rules of Court, rule 3.1324.  A motion to amend a pleading before trial must state which allegations were deleted from and which allegations were added to the previous pleading and identify the changes “by page, paragraph, and line number.”  (Cal. Rules of Court, rule 3.1324(a).)  

   Cross-Complainants seek leave to file a SACC in order to add Alex Nahai (“Nahai”) and Alex Nahai Consulting Services, Inc. (“ANCS”) as Cross-Defendants for all causes of action. (Motion, 10.) The proposed SACC also adds claims for negligent and intentional misrepresentation against Genesis, Misle, Nahai and ANCS. (Id.) Cross-Complainants also submit a redline copy of the proposed SACC. (Declaration of Rebecca Lawlor Calkins (“Calkins Decl.”), Exh B.)

   Cross-Complainants have demonstrated compliance with California Rules of Court, rule 3.1324 (a).

   Additionally, “[a] separate declaration must accompany the motion and must specify: (1) The effect of the amendment; (2) Why the amendment is necessary and proper; (3) When the facts giving rise to the amended allegations were discovered; and (4) The reasons why the request for amendment was not made earlier.”  (Cal. Rules of Court, rule 3.1324(b).)  

   Cross-Complainants submit a declaration from their counsel, Rebecca Lawlor Calkins in support of the instant motion. Calkins attests that the affect of the proposed SACC is to add Nahai and ANCS as Cross-Defendants and to add claims for intentional misrepresentation and negligent misrepresentation as to Cross-Defendants Misle and Genesis. (Calkins Decl. ¶ 6.) Further, Calkins attests that on February 28, 2020, the Honorable Georgina Rizk granted Ownzones’ Motion to Compel Production of Documents and Privilege Log from Nahai. (Calkins Decl. ¶ 17.) Additionally, Nahai was ordered to sit for a second session of his deposition on November 25, 2020. (Calkins Decl. ¶ 18, Exh. G.) In response to these discovery orders, Nahai allegedly delayed in producing documents by slowly producing responsive documents on December 19, 2020 and on January 20, 2021. (Calkins Decl. ¶¶ 20-21.)

   The Calkins Declaration is insufficient for purposes of California Rules of Court, rule 3.1324(b).

   The Calkins Declaration fails to explain why the requested amendment is necessary and proper, or provide any reason why the requested amendment was not made earlier as to the new cause of action against existing Cross-Defendants. There is no explanation why 3 months passed without naming the defendants who were dismissed as Roe defendants. Additionally, there is an insufficient explanation of what previously unknown facts were obtained to justify the new misrepresentation and fraud claims. However, since failure to comply with California Rules of Court rule 3.1324 is not grounds to deny the motion, the court will analyze the substantive merits of the parties’ arguments.

2. Substantive Considerations ;

   Generally, motions for leave to amend will be granted unless the party seeking to amend has been dilatory in bringing the proposed amendment before the court and the delay in seeking leave to amend will cause prejudice to the opposing party. ; (See ;Atkinson v. Elk Corp. ;(2003) ;109 Cal.App.4th 739, 761 [“ ‘[I]t is an abuse of discretion to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.’ [Citations.] ; Furthermore, ‘it is irrelevant that new legal theories are introduced as long as the proposed amendments “relate to the same general set of facts.” [Citation.]’ ”]; ;Hirsa, ;supra, ;118 Cal.App.3d at p. 490.) ; Indeed, “courts are much more critical of proposed amendments ... when offered after long unexplained delay or on the eve of trial [citations], or where there is a lack of diligence, or there is prejudice to the other party [citations].” ; (Permalab-Metalab ;Equipment Corp. v. Maryland ;Cas. Co. ;(1972) 25 Cal.App.3d 465, 472.) ; ; ;

Cross-Complainants contend that leave to amend should be granted for the following reasons: (1) Cross-Complainants have diligently sought to add Nahai and ANCS as parties, and any delay in the ruling on Nahai and ANCS’ motion to strike roe amendments was due to the COVID-19 pandemic, (2) Cross-Complainants continue to discover new facts about Nahai and ANCS’ involvement due to Nahai’s delayed document production (3) no party will be prejudiced by the filing of the SACC and (4) the new causes of action against existing cross-defendants arise from the same facts as the FACC. (Motion, 11-15.)

In opposition, Plaintiffs contend that leave to amend should be denied because Cross-Complainants should not be permitted to add Nahai and ANCS after the court granted Nahai and ANCS’ motion to strike roe amendments. (Opposition, 2-3.) As to the request to add intentional and negligent misrepresentation causes of action, Plaintiffs contend that it should be denied because the court has already granted Genesis and Misle’s motion for summary adjudication as to these causes of action. (Opposition, 7-8.) Plaintiffs cite Mark Tanner Constr v. Huh Internal. Ins. Servs. (2014) 224 Cal. App. 4th 574 (Mark Tanner) in support of this argument.

Plaintiffs’ reliance on Mark Tanner is misplaced, as Mark Tanner did not reach the issue of whether leave to amend was proper . In Mark Tanner, Plaintiffs sued insurance companies for professional negligence and constructive fraud regarding handling of workers’ compensation claims. (Id., 579.) In response, defendants moved for summary judgment or summary adjudication. (Id., 580.) In response to this motion, Plaintiffs requested a continuance and shortly thereafter moved for leave to amend their complaint. (Id. at 581.) The proposed SAC added factual allegations about the agreement at issue between the parties as well as new causes of action. (Id. at 582.) However, the Court of Appeal did not consider whether it was proper for the trial court to have denied Plaintiffs’ motion for leave to amend.

In reply, Cross-Complainants contend that leave to amend must ultimately be granted because Plaintiffs have failed to demonstrate any prejudice which would warrant denying the motion given that Konecne and Belmeko have just answered the FACC and trial is more than a year away. (Reply, 4-6.) Additionally, Cross-Complainants contend that the court’s ruling on Genesis and Misle’s motion for summary adjudication cannot preclude the SACC’s proposed intentional and negligent misrepresentation causes of action, as the two are based on entirely separate facts. (Reply, 6-8.)

The court does not find that the dismissal of Roes 3 and 4 as not newly discovered potentially responsible parties precluded their being named as parties on an amended cross-complaint. The court is concerned that permitting Cross-Complainants to file the proposed SACC could be prejudicial because of the stage this litigation is in. Permitting Cross-Complainants to add new Cross-Defendants at this juncture could substantially increase Plaintiffs’ costs of preparing for trial, because ANCS and Nahai could require time to conduct their own discovery as to the Cross-Complainant and potentially file dispositive motions, all of which will cause substantial delay.

Because of inadequate notice, Cross-Complainants’ motion is denied.

Conclusion

Cross-Complainants’ motion is denied. Plaintiffs are to give notice.

***************

HEARING DATE: April 14, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

MOVING PARTY: Plaintiff, Genesis Media LLC

OPPOSING PARTIES: Defendants and Cross-Complainants, Dan Goman and Ownzones Media Network, Inc.

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: OK

MOTION: Plaintiff’s Motion for Preliminary Injunction

OPPOSITION: April 1, 2021

REPLY: April 2, 2021

TENTATIVE: Genesis’ motion is denied. Ownzones and Goman are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.  

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman. 

On May 14, 2018, Genesis filed an Ex Parte Application for Temporary Restraining Order seeking, among other things, possession of the 420tv.com (“420TV”) app and related information. (Declaration of Rebecca Lawlor Calkins (“Calkins Decl.”), ¶ 2, Exh. A.) The Ex Parte was denied. Specifically, the Honorable James C. Chalfant’s ruling indicated that Plaintiff failed to “establish a probability of success on the merits.”

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.  

On December 5, 2018, Ownzones and Goman (“Cross-Complainants”) filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.  

On February 4, 2019, Genesis filed an Application for Writ of Possession requesting, among other things, possession of 420TV. (Calkins Decl. ¶ 3, Exh. B.) The Application was denied. Specifically, the Honorable Elizabeth White’s ruling indicated that Genesis’ application “does not identify specific tangible property which the sheriff can identify in executing the writ.” (Id.)

On November 4, 2019, Cross-Complainants filed their First Amended Cross-Complaint. (“FACC”) The FACC alleges the following nine causes of action: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation, (4) negligent misrepresentation, (5) fraudulent transfer, (6) unjust enrichment, (7) account stated, (8) goods and services rendered/quantum meruit, (9) violation of Business and Professions Code ; 17200, et seq.

Genesis now moves for a preliminary injunction requiring Defendant Ownzones to turn over “the 420tv domain name, the source code for the 420tv app and web site, and any information necessary to turn control of the 420tv app.” (Notice of Motion, 2.) Additionally, Genesis seeks an order “precluding Ownzones from accessing the app and website to modify, delete, or alter any content on the 420Tv app.” (Id.) Ownzones and Goman oppose the motion.

Request for Judicial Notice

Genesis requests that the court take judicial notice of the following in support its motion:

1. Complaint in Securities and Exchange Commission v. Ownzones Media Network, Inc., Dan Goman, and Joseph Goman (United States District Court Case No. 2:20-cv-03108) (Exhibit 1);

    

2. Genesis’ SAC in this action. (Exhibit 2).

    

   Genesis’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

   Discussion

1. Legal Standard

    

Pursuant to Code of Civil Procedure, section 527, subdivision (a), “[a] preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor.”  “The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial.”  (Grothe v. Cortlandt Corp. (1992) 11 Cal.App.4th 1313, 1316.)   

“The ultimate questions on a motion for a preliminary injunction are (1) whether the plaintiff is ‘likely to suffer greater injury from a denial of the injunction than the defendants are likely to suffer from its grant,’ and (2) whether there is ‘a reasonable probability that the plaintiffs will prevail on the merits.’ ” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 408.) The moving party’s likelihood of suffering injury and probability of prevailing are considered on a sliding scale. (King v. Meese (1987) 43 Cal.3d 1217. “That is, the more likely it is that plaintiffs will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue. This is especially true when the requested injunction maintains, rather than alters, the status quo.” (Id. at 1227.) “In thus balancing the respective equities of the parties, the court must determine whether, pending a trial on the merits, the defendant should or should not be restrained from exercising the right claimed by it.”  (Tahoe Keys Prop. Owners' Assn. v. State Water Resources Control Bd. (1994) 23 Cal.App.4th 1459, 1471.)   

“The decision to grant a preliminary injunction rests in the sound discretion of the trial court . . . before the trial court can exercise its discretion the applicant must make a prima facie showing of entitlement to injunctive relief.  The applicant must demonstrate a real threat of immediate and irreparable injury.”  (Triple A Machine Shop, Inc. v. State of California (1989) 213 Cal.App.3d 131, 138.)  “[A]n injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff,” and the party seeking injunctive relief bears the burden to prove its absence.  (Dep’t of Fish & Game v. AndersonCottonwood Irrigation Dist. (1992) 8 Cal.App.4th 1554, 1564-1565.)   

1. Analysis

    

1. Genesis’ Likelihood of Prevailing

    

   A cause of action for breach of contract consists of the following elements: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) the resulting damages to the plaintiff.  (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “The essence of a contract is the meeting of minds on the essential features of the agreement.” (Krasley v. Superior Court (1980) 101 Cal.App.3d 425, 431.) A contract “is unenforceable if the parties fail to agree on a material term or if a material term is not reasonably certain.” (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1623.)

   A written contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect.  (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.)  An allegation of an oral agreement must “set[] forth the substance of its relative terms.”  (Gautier v. General Tel. Co. (1965) 234 Cal.App.2d 302, 305.)  

   Genesis contends that it has clearly established that it is likely to prevail on the merits of its claims against Ownzones because Genesis and Ownzones were parties to the Agreement and Ownzones breached section 9.1 of the Agreement by failing to turn over all intellectual property rights related to 420TV. (Motion, 10-13.) Additionally, Genesis contends that it was not required to pay a “service fee” as Ownzones will argue, because the alleged service fee was a “budget,” and not a service fee, as section 2.2.1 of the Agreement provided a mechanism for adjusting costs in subsequent years which allegedly affected the amount Genesis was required to contribute. (Id.) Genesis also cites to Integrated Dynamic Sols., Inc. v. VitaVet Labs, Inc. (2016) 6 Cal.App.5th 1178,1180-81 (Integrated) in support of the argument that a preliminary injunction in a breach of contract case requiring turnover of intellectual property information is proper when the contract provides that the party moving for injunction owns all rights to the intellectual property.

   In Integrated, the Court of Appeal held that a preliminary injunction that “alters the status quo” does not constitute an impermissible final adjudication of the merits of the lawsuit. (Id. at 1180.) Specifically, the Court of Appeal agreed with the trial court that Defendant made a persuasive showing that it was likely to prevail on the merits of its breach of contract cause of action, because the contract at issue provided that moving party only had a duty to pay upon delivery and acceptance of the software at issue. (Id. at 1184-1185.) Defendant had demonstrated that the software at issue in this action did not function without the source code, which was the subject of the preliminary injunction. (Id.) Additionally, the Court of Appeal agreed that Defendant had demonstrated that the balance of interim harm favored issuing the preliminary injunction, as it demonstrated that the software at issue would not function without the source code which was the subject of the preliminary injunction. (Id. at 1185.) Thus, a preliminary injunction requiring the opposing party to turn over the source code was properly issued, as this was an “extreme case” where the right to preliminary injunctive relief had been “clearly established.” (Id. at 1184.)

   In opposition, Ownzones and Goman contend that Genesis has failed to demonstrate a reasonable probability of prevailing because Genesis’ motion improperly construes the requirements of the Agreement. (Opposition, 3-7.) According to Ownzones and Goman, Genesis is incorrect that the service fee is equivalent to a “budget” pursuant to section 5.1 of the Agreement and additionally, the Agreement does not provide that Genesis is the sole owner of intellectual property rights in 420TV. (Id.)

   Here, section 5.1 of the Agreement provides as follows:

   5.1 Year One Service Fee. The annual service fee for the Media Business and Channel is US $4,100,000.00 (“Year One Service Fee”) and such amount shall be funded by Genesis and paid to OWNZONES in full within forty-live (45) days of the full execution of this Agreement by the Parties. The Parties approve of the Year One Service Fee set forth on Schedule A attached hereto.

   (Declaration of Howard Misle in Support of Motion (“Misle Decl.”), Exh. 1.) Additionally, sections 5.2.1 and 5.2.2 of the Agreement provides that after the first year, the parties were required to negotiate the service fee for each subsequent year. In the event the parties were unable to agree on a service fee for any subsequent year, the default increase was 4% (Id.)

   Additionally, the Agreement provides in pertinent part as follows with respect to intellectual property rights in 420TV:

   “9.1. Ownership. Genesis shall own and retain all right, title and interest in and to the Media Business. Channel and Channel Programming, including any and all intellectual property rights therein (collectively the “Genesis Property”): provided, however, the copyrights in and to the Channel Programming and the trademarks in and to the Channel brands and logos will be owned jointly by Genesis and Nahai. To the extent applicable. Genesis and Nahai shall be deemed to be the "author" of all Channel Programming and all such Genesis Property will constitute "works made for hire" under the U.S. Copyright Act (17 U.S.C. ;; 101 et seq.) and any other applicable copyright law. OWNZONES hereby waives any and all moral rights (including rights of integrity and attribution) in and to the Genesis Property. To the extent that any Channel Programming does not constitute a work made for hire (for example in jurisdictions where such designation would cause OWNZONES to be categorized as other than as an independent contractor of Genesis), OWNZONES hereby assigns to Genesis and Nahai all right, title and interest that OWNZONES may have or may hereafter acquire in all Channel Programming, including all intellectual property rights therein.

   9.2 OWNZONES and Pre-Existing IP: Notwithstanding the provisions of Section 9.1, OWNZONES shall retain all right, title, and interest in and to all of its technology, tools, methodologies and generic business processes, whether pre-existing or independently developed by OWNZONES, and all enhancements, modifications, or improvements thereto made by OWNZONES in connection with this Agreement (“OWNZONES Pre-Existing IP”), all of which are hereby licensed to the Media Business and Channel on a non-exclusive, non-transferable, royalty free basis to the limited extent they are incorporated into, or required for the use of, the Channel Programming and other deliverables as contemplated by this Agreement.”

   (Misle Decl., Exh. 1.)

   According to Genesis’ notice of motion, Genesis seeks a preliminary injunction requiring Ownzones to turn intellectual property of 420TV, which “consists of, but is not limited to:”

   a. Copyright registrations and all intellectual property rights for all content created for 420Tv;

   b. Hard copies of all content developed for the 420Tv site including disk drives;

   c. All information for access to all accounts at Incapsula.com where the 420Tv app is hosted that is used to store, build, deploy, publish and host 420Tv.com. including domain registrar accounts (namesilo.com), and account hosting sites (Incapsula.com);

   d. Apple/Google account credentials to where the app is being published or any account used to publish the app;

   e. All media assets including: code, video, images and any other account access or keys used to build, deploy or host 420tv.com and it's related software; and

   f. Any additional information as deemed necessary to gain control over the 420Tv app.

   Genesis’ request for an order requiring Ownzones to turn over all intellectual property in 420TV exceeds the limited rights discussed in the terms of the Agreement.

   Specifically, the Agreement does not provide Genesis sole ownership rights in 420TV’s intellectual property, as section 9.2 provides that Ownzones has some ownership interest in “pre-existing IP” which it licenses to 420TV. Additionally, and contrary to Genesis’ contentions, section 2.2.1 of the Agreement does not override section 5.1 on its face. Section 5.1 Agreement unambiguously states that Genesis is to fund a Year One “service fee” of $4,100,000 by paying that amount to Ownzones in full. Genesis has not submitted evidence that it performed that part of the Agreement

   For these reasons, the court finds that Genesis has not demonstrated a reasonable probability of prevailing on the merits of its claims against Ownzones.

2. The Parties’ Interim Harm

    

   Genesis argues that its motion must be granted so that Genesis can “generate revenues and mitigate its damages.” (Motion, 14.) In opposition, Ownzones and Goman contend that Genesis has failed to submit any evidence demonstrating its risk of irreparable harm if its motion is not granted. (Opposition, 13-14.)

   The court agrees with Ownzones and Goman. The motion includes no other argument or evidence regarding why denying Genesis’ motion will result in Genesis suffering irreparable harm. Thus, Genesis has not demonstrated that denying its request for preliminary injunction will result in it suffering greater interim harm than Ownzones.

   Because Genesis has not demonstrated a reasonable probability of prevailing on its claims or that denying its request for preliminary injunction will cause irreparable harm, Genesis’ motion is denied.

   Conclusion

   Genesis’ motion is denied. Ownzones and Goman are to give notice.

Case Number: ****6021    Hearing Date: January 27, 2021    Dept: 37

HEARING DATE: January 27, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

MOVING PARTY: Cross-Defendants Genesis Media, LLC and Howard Misle

OPPOSING PARTY: Cross-Complainants Ownzones Media Network, Inc. and Dan Goman

TRIAL DATE: February 2, 2022

PROOF OF SERVICE: OK

PROCEEDING: Cross-Defendants’ Motion for Summary Adjudication

OPPOSITION: March 16, 2020

REPLY: March 18, 2020

TENTATIVE: Cross-Defendants’ motion is denied. Cross-Complainants are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.  

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman. 

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.  

On December 5, 2018, Ownzones and Goman filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.  

On November 4, 2019, Ownzones and Goman filed their operative First Amended Cross-Complaint. (“FACC”) The FACC alleges the following causes of action: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation, (4) negligent misrepresentation, (5) fraudulent transfer, (6) unjust enrichment, (7) account stated, (8) goods and serviced rendered/quantum meruit, (9) violation of California Business and Professions Code ;17200, et seq.

Genesis and Misle (“Cross-Defendants”) now move for summary adjudication as to Ownzones and Goman’s (“Cross-Complainants”) cross-complaint, as follows:

1. Issue 1: Cross Defendant Howard Misle will move this Court for an order granting summary adjudication pursuant to Code Civ. Proc. ; 437c(f) as to Ownzones Media Network's First Cause of Action for breach of contract on the grounds that Howard Misle was not a party to the contract and there is no evidence that Howard Misle is the alter-ego of Genesis Media, LLC.

2. Issue 2: Cross Defendants Genesis Media, LLC and Howard Misle will move this Court for an order granting summary adjudication on Ownzones Media's Second Cause of Action for Promissory Fraud pursuant to Code Civ. Proc. ; 437c(f), on the grounds that Ownzones cannot as a matter of law establish the element of lack of intent to perform a promise.

3. Issue 3: Cross Defendants Genesis Media, LLC and Howard Misle will move this Court for an order granting summary adjudication on Ownzones Media's Third Cause of Action for Intentional Fraud pursuant to Code Civ. Proc. ; 437c(f), on the grounds that Ownzones cannot as a matter of law establish the elements of a material misrepresentation, intent to defraud, justifiable reliance or damages.

4. Issue 4: Cross Defendants Genesis Media, LLC and Howard Misle will move this Court for an order granting summary adjudication on Ownzones Media's Fourth Cause of Action for Negligent pursuant to Code Civ. Proc. ; 437c(t), on the grounds cross-defendants Misle and Genesis Media are entitled to judgment on the fourth cause of action for negligent misrepresentations because Ownzones cannot prove damages or reliance.

5. Issue 5: Cross Defendants Genesis Media, LLC and Howard Misle will move this Court for an order granting summary adjudication striking Ownzones Media's affirmative of unclean hands pursuant to Code Civ. Proc. ; 437c(t), on the grounds that there is no merit to that affirmative defense because the cross defendants conduct was justified and there is no relationship between the alleged misconduct to any alleged injuries suffered by Ownzones Media Network.

6. Issue 6: Cross Defendant Howard Misle will move this Court for an order granting summary adjudication pursuant to Code Civ. Proc. ; 437c(f) as to Ownzones Media Network's Fifth Cause of Action for fraudulent conveyance on the grounds that any alleged transfer of funds was justified.

7. Issue 7: Cross Defendant Howard Misle will move this Court for an order granting summary adjudication pursuant to Code Civ. Proc. ; 437c(f) as to Ownzones Media Network's Fifth Cause of Action for fraudulent conveyance on the grounds that any alleged transfer of funds did not render Genesis Media insolvent and therefore Ownzones did not suffer damages.

8. Issue 8: Cross Defendant Howard Misle will move this Court for an order granting summary adjudication pursuant to Code Civ. Proc. ; 437c(f) as to Ownzones Media Network's Sixth Cause of Action for unjust enrichment on the grounds that Ownzones lacks standing to assert that claim.

Cross-Defendants’ issues numbers 6-7 in support of the motion for summary adjudication are not proper under California Code of Civil Procedure, section 437c(f)(1). Code of Civil Procedure, section 437c(f)(1) provides that “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty.” Issues 6-7 both address the same cause of action. Thus, the court will address the parties’ arguments as to the FACC’s first through sixth causes of action and Ownzones and Goman’s affirmative defense of unclean hands.

Evidentiary Objections

Cross-Complainants’ Objections to Declaration of Steven Marsh

Sustained: 1-4

Cross-Defendants’ Objections to Declaration of Rebecca Lawlor Calkins

Objection 1: sustained.

Request for Judicial Notice

Cross-Defendants request that the court take judicial notice of the following in support of their motion:

1. Defendant Ownzones Media Network, Inc. and Dan Goman Answer to Genesis Media’s Second Amended Complaint;

2. Ownzones Media Network’s First Amended Cross complaint;

3. Answer filed by Cross Defendants Genesis Media LLC and Howard Misle to Ownzones First Amended Cross complaint and affirmative defenses.

Cross-Defendants’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

Discussion

1. Legal Authority

“The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Pursuant to Code of Civil Procedure, section 437c, subdivision (a):

A party may move for summary judgment in any action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding. The motion may be made at any time after 60 days have elapsed since the general appearance in the action or proceeding of each party against whom the motion is directed or at any earlier time after the general appearance that the court, with or without notice and upon good cause shown, may direct…. The motion shall be heard no later than 30 days before the date of trial, unless the court for good cause orders otherwise. The filing of the motion shall not extend the time within which a party must otherwise file a responsive pleading.

(Code Civ. Proc., ; 437c, subd. (a).) A motion for summary judgment may be granted “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., ; 437c, subd. (c).)

“The motion shall be supported by affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken. The supporting papers shall include a separate statement setting forth plainly and concisely all material facts that the moving party contends are undisputed. Each of the material facts stated shall be followed by a reference to the supporting evidence. The failure to comply with this requirement of a separate statement may in the court’s discretion constitute a sufficient ground for denial of the motion.” (Code Civ. Proc., ; 437c, subd. (b)(1); see also Cal. Rules of Court, rule 3.1350(c)(2) & (d).)

In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294 (Hinsley).) Pursuant to Code Civ. Proc., ; 437c, subdivision (p)(2):

A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.

(Code Civ. Proc., ; 437c, subd. (p)(2).) The court must “view the evidence in the light most favorable to the opposing party and accept all inferences reasonably drawn therefrom.” (Hinesley, 135 Cal.App.4th at p. 294; Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389 [Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”].) A motion for summary judgment must be denied where the moving party’s evidence does not prove all material facts, even in the absence of any opposition (Leyva v. Sup. Ct. (1985) 164 Cal.App.3d 462, 475) or where the opposition is weak (Salasguevara v. Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387).

1. Factual Summary

On May 22, 2017, Genesis, Ownzones and Nahai Consulting Services, Inc. entered into the Strategic Alliance Agreement. (Separate Statement in Support of Motion (“DSS”), ¶ 1; Exhibits in Support of Motion, Ex. 3 (Agreement.) Misle was not a party to the Agreement. (Id.)

Genesis is a Nevada limited liability company and maintains an Amended and Restated Operating Agreement. (DSS ¶ 2; Misle Decl., ¶¶ 17, 21.) Misle attests that in anticipation of performing on the Agreement, he formed Genesis on or about March 1, 2017 and then prepared an Amended and Restated Operating Agreement for Genesis effective December 27, 2017. (Misle Decl. ¶¶ 17, 21; Ex. 4.) Further, Misle attest that he and his wife owns Belmeko, which owns 70% of Genesis. (Misle Decl. ¶ 21.) Cross-Complaints dispute Misle’s contentions about Genesis’ ownership and contend that Misle was the “sole manager” of Genesis. (Separate Statement in Support of Opposition, ¶ 4; Exhibits in Support of Opposition, Ex. 5 (Misle Depo), 118:19-20.)

The parties dispute the meaning of the Agreement and specifically, its requirements for each party’s performance.

According to Misle, the Agreement required Genesis to fund a project with budget costs of $4.1 million. (Misle Decl. ¶ 22.) Further, Misle attests that in July 2017, he and Goman agreed to allow Genesis to pay $3.1 million within 45 days and the remaining $1 million after he “saw the progress Ownzones was making.” (Misle Decl. ¶¶ 23-25.) Misle attests that Genesis paid Ownzones $900,000 on June 16, 2017, $900,000 on July 7, 2017 and $1,300,000.00 on July 13, 2017. (Misle Decl. ¶ 26.)

Further, and according to Misle, Genesis was required to fund the “420TV project,” while Ownzones had no obligation to provide any money to fund the 420TV project and did not do so. (DSS ¶21; Misle Decl. ¶ 20.) Cross-Complainants dispute this and contend that Ownzones “incurred significant expenses” to comply with its own obligations under the Agreement relying on Misle’s representations that he would bring the advertisers he promised. (PSS ¶ 21; Exhibits in Support of Opposition, Ex. 8 (Hopps Depo), 58:8-59:3; Ex. 13 (Goman Decl.), ¶ 13.) Specifically, Rob Hopps was asked whether he believed $1,700.011.94 accurately reflects the amount Ownzones spent as of June 6, 2018 on the Agreement and stated: “I think there are many more expenses and costs that went into delivering the complex technologies that compromised 420TV in addition to these direct expenses, and so I do not believe that this captures the full investment of time, resources, subcontractors, everything that went into 420TV.” (Exhibits in Support of Opposition, Ex. 8, 58:8-59:3.)

Additionally, the parties dispute the Genesis’ financial condition and the extent and purpose of Misle’s withdrawals from Genesis’ bank accounts.

Pursuant to Section 5.5, subdivision (m) of Genesis’ Amended and Updated Operating Agreement, Genesis’ “Managers” shall have the power to “loan funds to any party on terms and conditions deemed reasonable by the Manager.” (DSS ¶ 41; Exhibits in Support of Motion, Ex. 4, p.8.) Pursuant to Section 6.2 of Genesis’ Amended and Updated Operating Agreement, “The Company shall pay to the Manager such salary and other benefits as shall be approved from time to time by the unanimous affirmative vote of written consent of the Class A Members.” (DSS ¶ 44; Ex. 4 at p. 13.)

First, Cross-Defendants contend that Genesis has been well-funded since inception and has over $1 million in its bank account as of February 28, 2018. (DSS ¶¶ 3, 5; Ex 5 – bates 61; Ex. 6 – Bates 064, 067, 070, 074, 083, 088, 091, 094; Ex. 7- Bates 097, 098; Ex. 8- bates 102; Ex. 9 – bates 104; Misle Decl. ¶¶ 25, 26-30.) Cross-Complainants contend that Misle continued to engage in unauthorized withdrawals from Genesis’ bank accounts from inception such that by October 2019, all of Genesis’ bank accounts had a balance of $0.00. (PSS ¶¶ 3, 5; Exhibits in Support of Opposition, 10-12 (Genesis Bank Accounts).)

Second, Cross-Defendants contend that Genesis loaned ACC Enterprises $1,204,000 secured by a promissory note bearing interest at the rate of prime plus 4%. (DSS ¶¶ 32-33; Ex. 10 (Promissory Note); Misle Decl. ¶¶ 51-52.) Cross-Complainants contend that there is no evidence that Genesis agreed to loan ACC Enterprises money, as the promissory note was never signed by a representative of Genesis. (PSS ¶¶ 32-33.) Additionally, Cross-Defendants contend that Belmeko properly issued a Unanimous Consent of Class A Members authorizing payment to Misle in the sum of $350,000 as compensation. (DSS ¶ 36; Exhibits in Support of Motion, Ex. 11 (Unanimous Consent); Misle Decl. ¶¶ 33, 52.) Misle attests in support of the motion that “based upon my discussions with my attorneys” which appear to be from his wife were authorized by Genesis’ Amended and Restated Operating Agreement as payments. (Misle Decl. ¶ 52.) Cross-Complainants contend that this Unanimous Consent was fabricated as compensation after Ownzones “exposed” Misle’s embezzlement from Genesis. (PSS ¶ 36

On May 4, 2018, Genesis terminated the Agreement. The instant action was filed on May 8, 2018. (DSS ¶ 6; Exhibits in Support of Motion, Ex. 13 (Notice of Termination).) Cross-Defendants contend that the Notice of Termination was not valid, as it was not served in compliance with Section 13.1 of the Agreement. (PSS ¶ 6.) The Agreement provides as follows:

“Termination for Cause. Any Party may terminate this Agreement upon another Party's material breach of this Agreement, provided that (a) the non-breaching party .sends written notice to the breaching party describing the breach in reasonable detail, (b) the breaching party does not cure the breach within thirty (30) days following its receipt of such notice (the "Notice Period") or a shorter period if reasonably necessary given the totality of the circumstances, and (c) following the expiration of the Notice Period. Die non-breaching party sends a second written notice to the breaching party indicating the non-breaching party's election to terminate this Agreement.”

(Exhibits in Support of Motion, Ex. 3.)

At the time of Genesis’ termination of the Agreement, Cross-Defendants contend that Genesis had $1,611,239.35 in its bank account and was able to complete any obligations under the Agreement. (DSS ¶ 7; Misle Decl. ¶¶ 14-16, 26-31.) Specifically, Misle attests that he transferred $1.6 million to another bank because Genesis’ Bank of America account was shut down because “banks regularly close company’s bank accounts that are engaged in the cannabis business.” (Misle Decl. ¶ 28.)

1. Analysis

    

1. First Cause of Action: Breach of Contract

A cause of action for breach of contract consists of the following elements: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) the resulting damages to the plaintiff.  (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “The essence of a contract is the meeting of minds on the essential features of the agreement.” (Krasley  

A written contract must be pled verbatim in the body of the complaint, be attached to the complaint and incorporated by reference, or be pled according to its legal effect.  (Bowden v. Robinson (1977) 67 Cal.App.3d 705, 718.)  An allegation of an oral agreement must “set[] forth the substance of its relative terms.”  (Gautier v. General Tel. Co. (1965) 234 Cal.App.2d 302, 305.)  

Cross-Defendants contend that summary adjudication on the first cause of action is required because Misle was not a party to the Agreement and Cross-Complainants cannot establish that Genesis is an alter ego of Misle. (Motion, 9-10.) Specifically, Cross-Defendants contend that Genesis is not an alter ego of Misle because Genesis was adequately capitalized such it was still able to fulfill its obligations under the Agreement. (Id.)

In California, the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require.  (Leek v. Cooper, supra, 194 Cal.App.4th at p. 411; Mesler . (1985) 39 Cal.3d 290, 301.) (Leek, supra, 194 Cal.App.4th at pp. 411, 418.) , (Id. )

In opposition, Cross-Complainants contend that whether Genesis was an alter ego of Misle is a question of fact and that regardless, there is evidence sufficient for a determination that Genesis was Misle’s alter ego. (Opposition, 10-16.) Specifically, Cross-Complainants contend that a jury could find that Genesis was Misle’s alter ego because Misle did make a series of unauthorized withdrawals from Genesis’ bank accounts, failed to maintain adequate records, and because Genesis was undercapitalized. (Id.)

In reply, Cross-Defendants contend that Cross-Complainants’ opposition fails because it fails to establish that an inequitable result will occur if Genesis is not treated as Misle’s alter ego. (Reply, 3-5.)

Viewing the evidence submitted in the light most favorable to Cross-Complainants, the court finds that triable issues of material fact exist with regard to whether Genesis was Misle’s alter ego and whether Misle is liable for Genesis’ actions. The court agrees with Cross-Complainants that alter ego liability is a question of fact. As discussed above, Cross-Defendants contend that Genesis was adequately capitalized at all times and made loans and money transfers for legitimate reasons. However, Cross-Complainants contend that Genesis was not adequately capitalized and made loans and money transfers for fraudulent reasons. The parties rely on the same bank statements in support of their contentions. Finally, the court disagrees that Cross-Complainants were required to demonstrate that Cross-Defendants satisfied both prongs of alter ego liability to defeat Cross-Defendants’ motion, as this is not the standard for a party opposing a motion for summary adjudication. The parties’ disputes regarding Genesis’ financial status constitute a triable issue.

For these reasons, Cross-Defendants’ motion is denied as to the first cause of action.

1. Second Cause of Action: Promissory Fraud

The elements to prove promissory fraud are: (1) the defendant made a representation of intent to perform some future action, and (2) the defendant did not really have that intent at the time that the promise was made. (Beckwith v. Dahl, (2012) 205 Cal. App. 4th 1039, 1060 (Beckwith)

Cross-Defendants contend that summary adjudication on the second cause of action is warranted because Cross-Complainants cannot establish that Misle never intended not to perform on the Agreement, as Cross-Complainants would be required to show something more than mere nonperformance under the Agreement. (Motion, 10-11.)

In opposition, Cross-Complainants contend that triable issues exist with regard to Misle’s intent to perform under the Agreement because Misle intentionally withheld some portion of the total due to Cross-Complainants and fraudulently withdrew money from Genesis from Genesis’ inception. (Opposition, 17-19.) Cross-Complainants contend that Misle admitted to intentionally withholding money from Cross-Complainants. (Additional Material Facts (“AMF”), ¶ 23; Exhibits in Support of Opposition, Ex. 3 (Misle Depo), 169:16-170:25.) Specifically, Misle testified as follows:

“Q: Did you know that Dan Goman was continuing to wait for you to pay the 1 million originally called for under the terms of the May 22nd, 2017 Strategic Alliance Agreement?

A: Yes.

Q: You knew that he was?

A: He wanted a million dollars. Who wouldn't?”

(Exhibits in Support of Opposition, Ex. 3 (Misle Depo), 169:16-170:25.)

In reply, Cross-Defendants contend that the opposition’s arguments about Misle’s intent fails because “nobody pays $3.1 million dollars” if they “had no intent on performing.” (Reply, 5-6.)

Viewing the evidence submitted in the light most favorable to Cross-Complainants, the court finds that a triable issue of material fact exists with regard to the second cause of action. Cross-Defendants contend that there is no triable issue with regard to Misle’s intent to perform because Misle paid $3.1 million out of the total due to Ownzones. However, Cross-Complainants contend that Misle intentionally withholding the last $1 million of the amount due to Cross-Complainants constitutes at least circumstantial evidence that Misle did not intend to perform according to the Agreement. The court agrees with Cross-Complainants that this constitutes a triable issue with regard to Misle’s intent.

For these reasons, Cross-Defendants’ motion is denied as to the second cause of action.

1. Third and Fourth Cause of Action: Intentional Misrepresentation

The elements of a fraud cause of action are: (1) misrepresentation (false representation, concealment, or omission); (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Davis v. Southern California Edison Co. (2015) 236 Cal.App.4th 619.) Fraud must be pled in the complaint specifically. General and conclusory allegations are not sufficient. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) Unlike most causes of action where the “the policy of liberal construction of the pleadings,” fraud requires particularity, that is, “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at 73; Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Every element of a fraud cause of action must be alleged both factually and specifically. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904; Cooper v. Equity General Insurance (1990) 219 Cal.App.3d 1252, 1262.)

A Plaintiff must prove the following in order to recover on a negligent ;misrepresentation claim: ;‘[M]isrepresentation ;of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another's reliance on the fact ;misrepresented; ignorance of the truth and justifiable reliance on the ;misrepresentation by the party to whom it was directed; ;and resulting damage....’ ” ;(Hydro-Mill Co., Inc. v. Hayward, Tilton & ;Rolapp ;Ins. Associates, Inc. ;(2004) 115 Cal.App.4th 1145, 1154, quoting ;Shamsian ;v. Atlantic Richfield Co. ;(2003) 107 Cal.App.4th 967, 983.) ; ; 

Cross-Complainants’ FACC alleges that Cross-Defendants intentionally misrepresented, among other things, the amount of advertising revenue that they would be able to generate for 420TV and that Cross-Complainants relied upon these representations by entering into the Agreement. (FACC ¶¶ 79-81.) Specifically, Cross-Complainants allege that Misle represented that he had “between 6 and 12 cannabis businesses” that were guaranteed to advertise on 420TV and that he himself had spent “millions” on advertising. (FACC ¶ 80.)

Cross-Defendants contend that summary adjudication on the third and fourth causes of action is required because Misle did not make misrepresentations of material fact and further, Cross-Complainants cannot establish reliance or damages. (Motion, 12-14.)

In opposition, Cross-Complainants contend that Cross-Defendants’ motion should be denied because the FACC’s third and fourth causes of action are based on Cross-Defendants’ false representations about the advertising revenue for 420TV. (Opposition, 19-20.) Cross-Complainants additionally contend that they were damaged as a result of relying on these statements by agreeing to enter into the Agreement and spending significant amounts of their money in fulfilling their obligations under the Agreement. (Id.) Cross-Complainants rely on Cohen v. S & S Constr. Co., (1983) 151 Cal. App.3d 941, 946 (Cohen) for the argument that representations about future facts can be actionable as intentional misrepresentations if a party holds himself out as an expert on these facts.

In Cohen, the Court of Appeal noted that “generally, actionable misrepresentation must be one of existing fact.” (Id. at 946.) However, a statement of future fact will be actionable as a misrepresentation if “a party holds himself out to be specially qualified and the other party is so situated that he may reasonably rely upon the former's superior knowledge.” [citation omitted] (Id.)

Viewing the evidence submitted in the light most favorable to Cross-Complainants, the court finds that triable issues of material fact exist with regard to the third and fourth causes of action. Based on guidance from Cohen, whether Cross-Defendants’ statements regarding the potential ad revenue for 420TV are misrepresentations is a triable issue, since the FACC makes specific allegations about Misle’s representations and alleged expertise in cannabis advertising.

For these reasons, Cross-Defendants’ motion is denied as to the third and fourth causes of action.

1. Affirmative Defense: Unclean Hands

“The doctrine of unclean hands requires unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the matter in controversy.” (Mendoza v. Ruesga (2008) 169 Cal.App.4th 270, 279.) “Unclean hands applies when it would be inequitable to provide the plaintiff any relief, and provides a complete defense to both legal and equitable causes of action.” (Id.) Whether the unclean hands doctrine applies depends on whether the unclean conduct directly relates to the transaction upon which the complaint is made, i.e., the subject matter involved. (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 681.)  

Cross-Defendants contend that Cross-Complainants’ unclean hands defense in its answer to the Complaint has no merit because each of the allegedly fraudulently transfers were proper and that regardless, Genesis was still adequately capitalized to perform its obligations under the Agreement. (Motion, 14-18.) In opposition, Cross-Complainants contend that there is a triable issue regarding their unclean hands defense given that Genesis’ various transfers were not proper and Genesis did not remain adequately capitalized. (Opposition 20-21.)

As discussed above, the court has found that there are triable issues with regard to whether Genesis was adequately capitalized and whether Genesis’ various transfers of funds were proper. Thus, viewing the evidence submitted in the light most favorable to Cross-Complainants, the court agrees that there is a triable issue with respect to Cross-Complainants’ unclean hands affirmative defense.

For these reasons, Cross-Defendants’ motion is denied as to Cross-Complainants’ affirmative defense.

1. Fifth Cause of Action: Fraudulent Transfer

“A fraudulent conveyance claim is set forth in the Uniform Fraudulent Transfer Act (UFTA), which is codified in Civil Code section 3439 et seq.  A fraudulent conveyance is a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.”  (Kirkeby (2004) 33 Cal.4th 642, 648 (Kirkeby), internal quotation marks omitted.)  

Cross-Defendants contend that summary adjudication is required on the fifth cause of action because Genesis’ transfers were all proper under its Amended and Updated Operating Agreement and, further, because these transfers did not leave Genesis insolvent or undercapitalized at any time. (Motion, 18-19.)

As discussed above, the court finds that there are triable issues regarding whether Genesis’ transfers of funds were proper and whether Genesis was adequately capitalized to perform under the Agreement. Thus, the court now finds that there are triable issues with respect to Cross-Complainants’ fifth cause of action.

1. Sixth Cause of Action: Unjust Enrichment

In California, there is no cause of action for unjust enrichment. (See Rutherford Holdings LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231; Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1138.) However, courts have recognized that unjust enrichment claims can be construed as quasi-contract claims seeking restitution. (See Rutherford Holdings, supra, 223 Cal.App.4th at 231; Levine, supra, 189 Cal.App.4th at 1138.)  

Cross-Defendants contend that summary adjudication is warranted as to the sixth cause of action because Ownzones lacks standing to bring an action for unjust enrichment as it is not a member of Genesis and has suffered no damages. (Motion, 19.) In opposition, Cross-Complainants contend that there are triable issues regarding the sixth cause of action because the sole purpose of Genesis was to hold money for 420TV and pay Ownzones and thus, Genesis not paying Ownzones constitutes damage to Ownzones. (Opposition, 22-23.)

Cross-Defendants do not respond to Cross-Complainants’ argument in their reply.

It is undisputed that Genesis was created for purposes of performing under the Agreement, including paying money to Ownzones. Thus, the court agrees with Cross-Complainants that Ownzones has standing to sue for unjust enrichment as Ownzones may allege that it was damaged by Cross-Defendants’ failure to pay according to the Agreement.

For these reasons, Cross-Defendants’ motion is denied as to the sixth cause of action.

Conclusion

Cross-Defendants’ motion is denied. Cross-Complainants are to give notice.

Case Number: ****6021    Hearing Date: January 05, 2021    Dept: 37

HEARING DATE: January 5, 2021

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

TRIAL DATE: February 2, 2022

PROOF OF SERVICE: OK

MOTION: Motion for Order Quashing Deposition Subpoena to Heritage Bank of Nevada

MOVING PARTY: Cross-Defendant, Howard Misle

OPPOSING PARTIES: Defendants and Cross-Complainants, Dan Goman and Ownzones Media Network, Inc.

OPPOSITION: December 21, 2020

REPLY: None as of December 31, 2020

TENTATIVE: Misle’s Motion to Quash Subpoena to Heritage Bank of Nevada is denied. Ownzones and Goman are to give notice.

MOTION: Motion for Order Quashing Deposition Subpoena to Altabank

MOVING PARTY: Cross-Defendant, Howard Misle

OPPOSING PARTIES: Defendants and Cross-Complainants, Dan Goman and Ownzones Media Network, Inc.

OPPOSITION: December 21, 2020

REPLY: None as of December 31, 2020 [

TENTATIVE: Misle’s Motion to Quash Subpoena to Altabank is denied. Misle’s motion for terminating sanctions is denied. Ownzones and Goman are to give notice.

MOTION: Motion to Quash Service of Summons

MOVING PARTY: Cross-Defendants, Meghan Konecne and Belmeko, LLC

OPPOSING PARTIES: Defendants and Cross-Complainants, Dan Goman and Ownzones Media Network, Inc.

OPPOSITION: December 21, 2020

REPLY: December 23, 2020

TENTATIVE: Konecne and Belmeko’s motion is denied. Ownzones and Goman are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.  

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman. 

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.  

On December 5, 2018, Ownzones and Goman filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.  

On March 3, 2020, Ownzones and Goman filed amendments to their cross-complaint, naming Alex Nahai (“Nahai”) and Alex Nahai Consulting (“ANCS”) as roes 3 and 4. On December 28, 2020, Genesis, Nahai and ANCS’ motions to quash Ownzones and Goman’s March 3, 2020 roe amendments as to Nahai and ANCS were granted.

Misle now moves to quash subpoenas to Altabank and Heritage Bank of Nevada for his personal records and those of his wife, Meghan Konecne. Misle additionally moves for an order of terminating sanctions against Goman and Ownzones through his motion to quash as to Heritage Bank. Finally, Konecne and Cross-Defendant Belmeko, LLC (“Belmeko”) move to quash summons as to them. Goman and Ownzones oppose all motions.

The court will address the motions to quash subpoena first, followed by the motion to quash summons.

MOTIONS TO QUASH SUBPOENA

Request for Judicial Notice

Misle requests that the court take judicial notice of the following in support of his motion to quash Subpoena to Altbank:

1. Misle’s Motion to Quash Subpoena to Heritage Bank of Nevada

   Misle’s request is granted. The existence and legal significance of this document is a proper matter for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

   Discussion 

1. Legal Standard 

    

   A court “may make an order quashing the subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders. In addition, the court may make any other order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.”  (Code Civ. Proc., ; 1987.1.)  The court, upon motion reasonably made by the party, may rule upon motions for quashing, modifying or compelling compliance with, subpoenas.  (See, e.g., Lee v. Swansboro Country Property Owners Ass’n

   “When the right to discovery conflicts with a privileged right, the court is required to carefully balance the right of privacy with the need for discovery.”  (Tylo v. Superior Court (1997) 55 Cal.App.4th 1379, 1387 (Tylo).)  “The burden is on the party seeking the constitutionally protected information to establish direct relevance.”  (Davis v. Superior Court (1992) 7 Cal.App.4th 1008, 1017.)  “Mere speculation as to the possibility that some portion of the records might be relevant to some substantive issue does not suffice.”  (Ibid.)  

    

2. Analysis

    

1. Discovery Cut-Off

    

   Pursuant to Code of Civil Procedure section 2024.020, subdivision (a) the discovery cut-off is 30 days “before the date initially set for trial.” Additionally, except as provided in Code of Civil Procedure section 2024.020, subdivision (b), “a continuance or postponement of the trial date does not operate to reopen discovery proceedings.” Code of Civil Procedure, section 2025.050 provides requirements for a party to bring a motion to reopen discovery by noticed motion.

   As a preliminary note, Misle argues in support of both motions that both subpoenas should be quashed because they were served outside of the May 11, 2020 discovery cut-off, which has since not been continued. (MTQ Heritage, 8; MTQ Altabank, 6-7.) According to Misle, at the time of filing the instant motions the court had continued the trial date in this matter to September 21, 2020 but did not continue the discovery cut-off and, as such, it was not continued but instead expired on May 11, 2020. (Id.; April 16, 2020 Minute Order). The April 16, 2020 Minute Order provides in pertinent part as follows:

   “On the Court's own motion, the Jury Trial (estimate: 7 days) scheduled for 06/08/2020 is advanced to this date and continued to 09/21/2020 at 10:00 AM in Department 48 at Stanley Mosk Courthouse.”

   The order makes no mention that the discovery cut-off was continued according to the September 21, 2020 trial date.

   In opposition, Ownzones and Goman contend that the discovery cut-off has not passed as “Common sense indicated that all pre-trial dates were also continued given the emergency nature of the COVID pandemic.” (Opposition, 7-8.) Additionally, Ownzones and Goman points to the court’s June 15, 2020 Minute Order continuing hearings on discovery motions to dates after May 11, 2020 for the proposition that the discovery cut-off has not passed. (Id.)

   On April 14, 2020 the Presiding Judge issued an Order to address court actions relating to the COVID 19 pandemic that stated that all trials between 4/17 to 5/12 are to be continued to a date beyond 6/22 and that all pre-trial dates are continued accordingly.

2. Deposition Subpoena to Heritage Bank of Nevada

    

   Misle contends that regardless of the discovery-cutoff, the subpoena to Heritage Bank of Nevada must be quashed because it seeks production of personal documents from himself and his wife which are not calculated to lead to the discovery of admissible evidence and violates their right to privacy. (MTQ Heritage, 8-10.) Specifically, Misle contends that he and his wife have a right of privacy in their personal banking records from Heritage Bank, which start in 2011, as such records have no relationship to the instant action regarding Genesis, which was not formed until 2017. (MTQ Heritage, 8-11.)

   Ownzones and Goman’s subpoena to Heritage Bank seeks “DOCUMENTS EVIDENCING” various activity regarding accounts controlled by Misle “from inception to present,” and all loan applications “submitted by, or on behalf of Misle.” (Declaration of Robert Klein in Support of Motion (“Klein Decl.”), Ex. 2.) “DOCUMENTS” is defined as including, “but not be limited to,” “all monthly bank statements, wire transfer instructions and receipts, account opening and closing documentation, cancelled checks, cashier’s checks, signature cards, and all communications relating to such accounts.” (Id.)

   In opposition, Ownzones and Goman first contend that Misle’s motion is improper as to the Heritage Bank of Nevada subpoena because Nevada is the proper forum to bring a motion to quash. (Opposition MTQ Heritage, 6-7.) Ownzones and Goman cite to Quinn v. Eighth Judicial District court in and for County of Clark (2018) 134 Nev. 25 (Quinn) for this argument.

   In Quinn, the Nevada Supreme Court noted that Nevada, as well as California, have adopted the “Uniform Interstate Depositions and Discovery Act” (“UIDDDA”) to facilitate parties conducting discovery in other states. (Id. at 30.) Under this Act, “Any motion practice associated with the discovery subpoena, such as a motion to enforce or quash a subpoena, must take place in the discovery state and is governed by the law of the discovery state.” (Id.)

   Thus, the court finds that the UIDDA applies to the instant subpoena. Pursuant to the UIDDA, Nevada is the discovery state for purposes of the instant subpoena and, as such, any motion to quash should be brought in Nevada courts. For this reason, Misle’s motion to quash is denied as to the Subpoena to Heritage Bank of Nevada.

3. Deposition Subpoena to Altabank

    

   Misle contends that regardless of the discovery-cutoff, the subpoena to Altabank must be quashed because it seeks production of personal documents from himself and his wife which are not calculated to lead to the discovery of admissible evidence and violates their right to privacy. (MTQ Altabank, 10-12.)

   In opposition, Goman and Ownzones also contends that any motion to quash the Altabank subpoena is not properly brought before this court as it should have been brought a Utah court given that Utah has also adopted the UIDDA. (Opposition MTQ Altabank, 6-7.) Pursuant to Utah Code Section 78B-17-204, “[a]n application to the court for a protective order or to enforce, quash, or modify a subpoena issued by a clerk of court under Section 78B-17-201 must comply with the rules or statutes of Utah and be submitted to the court in the judicial district in which discovery is to be conducted.”

   Ownzones and Goman’s subpoena to Altabank similarly asks Altabank to produce all “DOCUMENTS EVIDENCING” accounts owned by Misle from inception to present as well as all loan applications made by or on behalf of Misle. (Klein Decl., Ex. 2.) “DOCUMENTS” is defined as including, “but not be limited to,” “all monthly bank statements, wire transfer instructions and receipts, account opening and closing documentation, cancelled checks, cashier’s checks, signature cards, and all communications relating to such accounts.” (Id.)

   Thus, the court finds that the UIDDA applies to the instant subpoena. Pursuant to the UIDDA, Utah is the discovery state for purposes of the instant subpoena and, as such, any motion to quash should be brought in Utah courts. For this reason, Misle’s motion to quash is denied as to the Subpoena to Altabank.

4. Request for Sanctions

   It is well established that the primary purpose of discovery sanctions is curative, not punitive.  (Welgoss Doppes

   Misle requests in his motion to quash subpoena to Altbank that the court issue a terminating sanction against Goman and Ownzones on the grounds that their counsel twice served a deposition subpoena past the discovery cut-off in this action after being apprised that doing so was improper and because “[a]ny reasonable attorney would also have known that Howard Misle and Meghan Konence’s personal banking records have absolutely no relevance in this breach of contract case.” (MTQ Altabank, 13-14.)

   Based on the order of the presiding judge, the discovery was not issued past the discovery cutoff. Therefore, an order for terminating sanctions is unwarranted.

   Conclusion

   Misle’s Motion to Quash Subpoena to Heritage Bank of Nevada is denied. Ownzones and Goman are to give notice.

   Misle’s Motion to Quash Subpoena to Altabank is denied. Misle’s motion for terminating sanctions is denied. Ownzones and Goman are to give notice.

   MOTION TO QUASH SERVICE OF SUMMONS

   Konecne and Belmeko move to quash service of summon as to them on the grounds that they are Nevada residents and thus, California has neither general nor specific jurisdiction over them for purposes of this action.

Request for Judicial Notice

Genesis and Ownzones request that the court take judicial notice of the following in support of their opposition to Konecne and Belmeko’s motion to quash:

1. May 20, 2020 Motion to Quash Subpoena to Heritage Bank filed by Misle and Konecne (Exhibit A);

2. Separate Statement in Support of May 20, 2020 Motion to Quash Subpoena to Heritage Bank (Exhibit B)

Additionally, Konecne and Belmeko request that the court take judicial notice of the following in support of their motion:

1. Notice of Entry of Findings of Fact, Conclusions of Law and Judgment in the matter of Genesis Media LLC and Howard Misle vs. Joseph Edward Gugluizza; Academy Global Investments et. al. entered on December 8,2020 in the District Court, Clark County, Nevada as case number A-19-800421 -B (Request for Judicial Notice in Support of Reply, Exhibit A.)

Both parties’ requests are granted. The court takes judicial notice of the existence and legal significance of each document. (Evidence Code ; 452, subds. (d), (h).)

Discussion

A defendant may move to quash service of summons on the ground the court lacks personal jurisdiction.  (Code Civ. Proc., ; 418.10, subd. (a)(1).)   

“In the absence of a voluntary submission to the authority of the court, compliance with the statutes governing service of process is essential to establish that court’s personal jurisdiction over a defendant.”  (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1439 (Dill).)  “When a defendant challenges that jurisdiction by bringing a motion to quash, the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service.”  (Ibid.)  “However, strict compliance is not required.  In deciding whether service was valid, the statutory provisions regarding service of process should be liberally construed to effectuate service and uphold the jurisdiction of the court if actual notice has been received by the defendant.  [Citation.]  Thus, substantial compliance is sufficient.”  (Dill, 24 Cal.App.4th at pp. 1436-1437.) 

A defendant may move to quash service of summons on the ground the court lacks personal jurisdiction. ; (Code Civ. Proc., ; 418.10, subd. (a)(1).) ; ;By ;statute, the courts of this state may exercise personal jurisdiction over nonresident defendants to the extent permitted by the United States Constitution. ; (Code Civ. Proc., ; 410.10.) ; Under the Constitution, due process requires that a nonresident defendant have ;“certain minimum contacts” with a forum such that the court’s exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice. ; (Int’l Shoe Co. v. Wash. ;(1945) 326 U.S. 310, 316.) ;  

 

1. General Jurisdiction ;

   General jurisdiction exists where the activities of a non-resident defendant are so “extensive or wide-ranging” or “substantial … continuous and systematic” to establish a constitutionally sufficient relationship to warrant jurisdiction for all causes of action asserted against it. ; (Cornelison ;v. Chaney ;(1976) 16 Cal.3d 143, 147.) ; ; ;

   Konecne and Belmeko contend that they are not subject to general jurisdiction in California because they have not had systematic and continuous contact with California. (Motion, 7-8.) Konecne and Belmeko submit a declaration from Konecne in support of the instant motion.

   Konecne attests that she moved to Las Vegas in January 2016 and “have lived there continuously” since that time with Misle and their children. (Konecne Decl. ¶ 8.) Additionally, Konecne attests that she has never met any of the people at Ownzones and is not involved in the business dealings between Ownzones and Genesis. (Konecne Decl. ¶¶ 9-10.) Further, Konecne attests that she never “engaged in business” in California, “maintained any office” in California, had any employees or transacted business in California, owned property in California, had a “phone listing in California,” or had any “connection” with California. (Konecne Decl. ¶¶ 13-16.) Konecne attests that “at one time” she had a bank account at Malaga Bank, but that it was closed “several years ago and probably in 2015.” (Konecne Decl. ¶ 17.)

   In opposition, Genesis and Ownzones do not contend that Belmeko is subject to general jurisdiction in California or dispute Konecne and Belmeko’s contentions in this regard. Thus, the court finds that Belmeko is not subject to general jurisdiction in California.

   Genesis and Ownzones contend that Konecne is subject to general jurisdiction in California because she resided in California for at least six months out of every year until 2017 and owned a bank account through a bank that only had branches in Southern California until 2019 and thus, was “effectively” a resident of California at all times relevant to this action (Opposition, 10-11.) Genesis and Ownzones point to Exhibit H, which is a Change of Address Form from Konecne’s bank records. Exhibit H indicates that Konecne lived at 35 Via Del Cielo, Rancho Palos Verdes, California 90275 prior to February 10, 2017. (Declaration of Rebecca Lawlor Calkins (“Calkins Decl.”), Ex. H.)

   The court finds that general jurisdiction does not exist as to Konecne. Konecne has submitted evidence through her declaration that she is not involved in the business between Genesis and Ownzones and does not live in California or transact business in California. Although Genesis and Ownzones submit evidence that Konecne filled out a Change of Address form on February 10, 2017 which lists a California address, this is insufficient to establish general jurisdiction.

   The court will turn to the parties’ arguments regarding specific jurisdiction.

    

2. Specific Jurisdiction ;

   “A court may exercise specific jurisdiction over a nonresident defendant only if: (1) the defendant has ;purposefully availed ;himself or herself of forum benefits; (2) the controversy is related to or arises out of the defendant’s contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice.” ; ;(Elkman ;v. National States Ins. Co. ;(2009) 173 Cal.App.4th 1305, ;1314, emphasis in original (Elkman).) ; To determine whether the exercise of specific jurisdiction is proper in a given case, courts consider the relationship among the defendant, the forum, and the litigation. ; (Pavlovich v. Superior Court ;(2002) 29 Cal.4th 262, 269.) ; ;“[I]t is the defendant’s conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him.” ; (Walden v. Fiore ;(2014) 134 ;S.Ct. 1115, 1122 (Walden).) ; “[A] ;defendant’s contacts with the ;forum ;State may be intertwined with his transactions or interactions with the plaintiff or other parties. ; ;But a defendant’s relationship with a plaintiff or third party, standing alone, is an insufficient basis for ;jurisdiction.” ; (Id. ;at p. 1123.) ; ;It is the plaintiff’s burden to demonstrate that the defendant’s conduct giving rise to the pleaded causes of action amounts to constitutionally cognizable “minimum contacts.” ; (Elkman, ;supra, ;173 Cal.App.4th at p. 1313.) ; ; ;

   “[P]urposeful ;availment ;occurs where a nonresident defendant purposefully directs ;its activities at residents of the forum [citation], ;purposefully derives ;benefit ;from’ its activities in the forum [citation], ;creates a substantial connection with the forum [citation], ;deliberately has engaged in significant activities within’ the forum [citation], ;or has created continuing obligations between itself ;and residents of the forum.” (Anglo Irish Bank Corp. v. Superior Court ;(2008) 165 Cal.App.4th 969, 978 (Anglo Irish), internal quotation marks and citations omitted.) ; ; ;

1. Purposeful Availment

Konecne and Belmeko contend that specific jurisdiction does not exist over them because Ownzones and Goman cannot prove that they purposefully directed their activities at California. (Motion, 6-7.) Specifically, Konecne and Belmeko contend that the only fact which may demonstrate their activities in California is that Konecne, while a resident of Nevada, signed a Nevada consent form authorizing Misle to receive compensation for operating Genesis, a Nevada limited liability company. (Motion, 6.)

In opposition, Ownzones and Goman contend that both Konecne and Belmeko purposefully availed themselves of the California forum.

First, as to Belmeko, Ownzones and Goman contend that it is the “Founding Member” “Managing Member” and “sole Class A Member” of Genesis, a company whose sole purpose was to enter into a contract governed by California law. (Opposition, 7-8; Calkins Decl., Exs. J at 18:18-23; Ex. K (Genesis Operating Agreement).) According to page 31 of Exhibit K to the Calkins Declaration, Misle signed on behalf of Belmeko as the only “Class A Member” of Genesis. (Calkins Decl., Ex. K.) Further, section 5.5 of the Genesis Operating Agreement provides the Manager with broad powers, including the “complete and exclusive right, power and authority to manage and control all the business, affairs [and] assets… and [is] empowered to represent and bind [Genesis].” (Opposition, 8.) Further, Ownzones and Goman contend that Belmeko played an “intimate role” in Genesis’ wrongdoing in this action by, for example, attempting to amend the Agreement on July 7, 2017 “to permit Genesis to defer a million dollars in service fees owed to Ownzones.” (Id.; Calkins Decl., Ex. D.) Further, Ownzones and Goman contends that Belmeko “fraudulently authorized” “looting of Genesis’ accounts to detriment of Ownzones.” (Id.)

Second, as to Konecne, Ownzones and Goman contend that she has also purposefully availed herself of California because she is the managing member of Belmeko. (Opposition, 11-12.) Ownzones and Goman point to Misle’s testimony in support of this argument. Misle testified as follows about his communication with Belmeko regarding any payments made by Genesis:

Q: Was Genesis in the habit of loaning money to other companies that you controlled?

A: If Genesis decided to loan money to another company, it could.

Q: Who would make that decision?

A: It would be made by Belmeko.

Q: By Meghan?

A: Yeah, Meghan, with my input.

(Calkins Decl., Ex. J, 78:8-18.)

Q: Did you tell any of the investors you were taking $9,000 cash out of the Genesis Media account?

A: I didn’t need to tell any of the investors. I was taking money out of the account.

Q: Why not?

A: I don’t need their permission to take money out of the account.

Q: Do you need anyone’s permission?

A: Belmeko.

Q: And did you tell Belmeko?

A: Absolutely.

Q: But Belmeko is Meghan?

A: Right, and me.

(Calkins Decl., Ex. J, 120:13-25.) Ownzones and Goman also points to the “Unanimous Consent of Class A Members of GENESIS MEDIA, LLC” which Konecne signed. (Calkins Decl., Ex. L.) This document provided that pursuant to Section 6.2 of the Operating Agreement, Genesis authorized a commission payment of $350,000 to Misle. (Id.)

Konecne and Belmeko’s reply does not address the purposeful availment arguments made in opposition. Instead, the reply contends that the court should find that collateral estoppel applies to bar the entire action against Konecne and Belmeko because of the ruling in Genesis v. Gugluizza, which Konecne and Belmeko requested that the court take judicial notice of. The court disagrees. Konecne and Belmeko may not seek relief on an entirely new grounds in their reply papers, as their moving papers make no mention of this collateral estoppel argument. Additionally, the court does not take judicial notice of the truth of the matters in the Genesis v. Gugluizza ruling, only of its existence and legal significance. Furthermore, it is a trial court judgment entered on December 8, 2020, and there is no showing that it is a final judgment that would make collateral estoppel applicable. Thus, the court will not consider Konecne and Belmeko’s collateral estoppel argument for this additional reason.

The opposition fails to identify any conduct or actions taken by Konecne and Belmeko that did not occur in Nevada or other states. All of the bank records submitted were from out-of-state bank accounts, except for the Malaga account opened in Konecne’s name and that account was closed years ago. While the court has jurisdiction over Genesis, an LLC, that does not automatically give the court jurisdiction over its members. However, as the opposition points out, they have filed a motion to quash in this action availing themselves of the benefits of the law of this state. (Opp. p. 2.) Accordingly, the court finds they have submitted to the court’s jurisdiction.

1. Cause of Action Relate to California

Ownzones and Goman contend that all of Konecne and Belmeko’s contacts with California are related to this action.

First, Ownzones and Goman contend that Belmeko’s contacts with California are all related to this action because Misle has repeatedly testified that he required approval from Belmeko before transferring money on behalf of Genesis. (Opposition, 8-9; Calkins Decl., Ex. J, 19:24-20:4, 120:13-25.) Second, Ownzones and Goman similarly contend that Konecne’s contacts with California were also all related to this action based on Misle’s testimony that he always asked Belmeko for permission before transferring money on behalf of Genesis. (Opposition, 12.)

As discussed above, Konecne and Belmeko’s reply does not address this argument and only addresses a new argument that collateral estoppel should apply to bar this action, which the court finds unavailing.

For these reasons, the court finds that Konecne and Belmeko’s contacts with California relate to this action. The court will proceed to analyze whether applying exercising specific jurisdiction over Konecne and Belmeko would comport with fair play and substantial justice.

1. Fair Play and Substantial Justice

In deciding whether exercising jurisdiction over a foreign company would comport with fair play and substantial justice, courts may consider the following: “ “the burden on the defendant,” “the forum State's interest in adjudicating the dispute,” “the plaintiff's interest in obtaining convenient and effective relief,” “the interstate judicial system's interest in obtaining the most efficient resolution of controversies,” and the “shared interest of the several States in furthering fundamental substantive social policies.”” (Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 477.)

Ownzones and Goman contend that the court exercising specific jurisdiction over Konecne and Belmeko would comport with fair play and substantial justice because Misle and Genesis have often pointed at Belmeko as a “justification for its unlawful actions” or stated that they required permission from Belmeko to take certain actions. (Opposition, 9-10, 12.) Konecne and Belmeko do not respond directly to this argument.

The court finds that exercising specific jurisdiction over Konecne and Belmeko would comply with fair play and substantial justice. As discussed above, Misle has repeatedly testified that he is required to consult with Belmeko before taking actions on behalf of Genesis, and that Konecne is involved in managing Belmeko. Further, Konecne and Belmeko have offered no reason for why it would not be fair play to exercise specific jurisdiction over them.

For these reasons, Konecne and Belmeko’s motion is denied.

Conclusion

Konecne and Belmeko’s motion is denied. Ownzones and Goman are to give notice.

Case Number: ****6021    Hearing Date: December 28, 2020    Dept: 37

HEARING DATE: December 28, 2020

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

TRIAL DATE: February 2, 2022

PROOF OF SERVICE: OK

MOTION: Motion for Order Striking Cross Defendants Alex Nahai and Alex Nahai Consulting

MOVING PARTY: Plaintiff, Genesis Media, LLC

OPPOSING PARTIES: Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

OPPOSITION: December 14, 2020

REPLY: December 16, 2020

TENTATIVE: Genesis’s motion is granted. the court orders Ownzones and Goman’s March 3, 2020 roe amendments stricken. Moving party to give notice

MOTION: Motion for Order Striking Cross Defendants Alex Nahai and Alex Nahai Consulting

MOVING PARTIES: Cross Defendants, Alex Nahai and Alex Nahai Consulting

OPPOSING PARTIES: Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

OPPOSITION: December 14, 2020

REPLY: December 18, 2020

TENTATIVE: Nahai and Alex Nahai Consulting’s motion is granted. the court orders Ownzones and Goman’s March 3, 2020 roe amendments stricken. Moving parties to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.  

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman. 

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.  

On December 5, 2018, Ownzones and Goman filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.  

On March 3, 2020, Ownzones and Goman filed amendments to their cross-complaint, naming Alex Nahai (“Nahai”) and Alex Nahai Consulting (“ANCS”) as roes 3 and 4.

Genesis now moves for an order striking Ownzones’ roe amendments naming Nahai and ANCS. Nahai and ANCS join in Genesis’ motion and also separately move to strike these roe amendments. Additionally, Genesis, Nahai and ANCS alternatively request that the court sever or dismiss Nahai and ANCS pursuant to Code of Civil Procedure, section 379.5. Ownzones and Goman oppose both motions.

Request for Judicial Notice

Genesis requests that the court take judicial notice of the following in support of its motion:

1. Securities and Exchange Commission Complaint against Ownzones and Goman, filed April 2, 2020, case number 2:20-cv-03108 (Attached to Genesis RJN)

   Genesis’ request is granted. The existence and legal significance of this document is a proper matter for judicial notice. (Evidence Code ; 452, subds. (d), (h).)

   Discussion

1. Meet and Confer Requirements

    

   Pursuant to Code of Civil Procedure section 435.5, subdivision (a), “Before filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining if an agreement can be reached that resolves the objections to be raised in the motion to strike.”

   Genesis’ motion includes no mention that its counsel, Robert Klein, met and conferred with counsel for Ownzones and Goman prior to filing the instant motion. (see Opp to Genesis Motion, 6-7.) However, Ownzones and Goman do not argue that Genesis’ motion should be denied on this basis. Thus, because failure to meet and confer is not grounds to deny the motion, the court will analyze the merits of Genesis’ motion.

   Additionally, Nahai and ANCS submits the declaration of their counsel, Alexander C. Tabolsky (“Tabolsky”) to demonstrate that they have fulfilled their statutory meet and confer requirements prior to filing the instant motion. Tabolsky attests that on May 13, 2020, he sent a meet and confer letter to counsel for Ownzones and Goman outlining the arguments raised in the instant motion but that Ownzones and Goman have failed to substantively respond and rebut these arguments. (Tabolsky Decl. ¶¶ 3-4.) The Tabolsky Declaration is sufficient for purposes of Code of Civil Procedure, section 435.5.

2. Legal Authority

    

Pursuant to Code of Civil Procedure, section 436, “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out 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.”  The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.”  (Code Civ. Proc., ; 437.)   

1. Analysis

    

   Genesis, Nahai and ANCS each make the following arguments in support of their motions (1) Ownzones and Goman were not truly ignorant of Nahai and ANCS such that Code of Civil Procedure section 474 applies, (2) in the alternative, Nahai and ANCS should be severed and/or dismissed pursuant to Code of Civil Procedure section 379.5. Genesis additionally argues in its motion that the roe amendments pertaining to Nahai and ANCS must be stricken because Ownzones cross-complaint against Nahai and ANCS is now time-barred. Additionally, Nahai and ANCS request an order to show cause against Ownzones and Goman pursuant to California Rules of Court, Rule 3.110 (f). The court will address each of these arguments in turn.

1. Whether Ignorant For Code of Civil Procedure Section 474

   The addition of a Doe defendant is governed by Code of Civil Procedure section 474, which provides:

   When the plaintiff is ignorant of the name of a defendant, he must state that fact in the complaint, or the affidavit if the action is commenced by affidavit, and such defendant may be designated in any pleading or proceeding by any name, and when his true name is discovered, the pleading or proceeding must be amended accordingly.

   “When a defendant is properly named under section 474, the amendment relates back to the filing date of the original complaint.”  (McClatchy v. Coblentz, Patch, Duffy & Bass, LLP (2016) 247 Cal.App.4th 368, 371.) The fact that plaintiff had the means of knowledge is not necessarily a bar to the application of section 474.” (Garrett v. Crown Coach Corp. (1968) 259 Cal.App.2d 647, 650.) “[E]ven though the plaintiff may know of the existence of a person, the plaintiff is ‘ignorant’ within the meaning of section 474 if he lacks knowledge of that person's connection with the case.” (Id.)

   Genesis, Nahai and ANCS contend that Ownzones and Goman cannot rely upon Code of Civil Procedure section 474 to add Nahai and ANCS as roes to the cross-complaint because Ownzones and Goman “knew of” Nahai and ANCS at least since August 2018, when they drafted a proposed cross-complaint which named both Nahai and ANCS as cross-defendants. (Genesis Motion, 9-12; Nahai Motion, 5-6.)

   Genesis submits the declaration of its counsel, Robert Klein (“Klein”) as well as Nahai in support of its motion. Both Klein and Nahai attests that on August 10, 2018, they received a proposed cross-complaint from counsel for Ownzones and Goman which indicated that Nahai and ANCS were proposed cross-defendants. (Klein Decl. ¶ 11, Nahai Decl. ¶ 10, Ex. 4.)

   In opposition, Ownzones and Goman contend that moving parties’ arguments must fail because they only demonstrate that Ownzones and Goman had knowledge of Nahai and ANCS’ identities, not that they had actual knowledge of facts giving rise to Nahai and ANCS’ potential liability. (see Opp to Genesis Motion, 3-5.) Ownzones and Goman cite to Dieckmann v. Superior Court (1985) 175 Cal.App.3d 345 (Dieckman) for the argument that the 2018 proposed cross-complaint is insufficient to demonstrate that Code of Civil Procedure section 474 does not apply.

   Dieckmann provide guidance on the definition of “ignorant” for purposes of Code of Civil Procedure section 474. According to the court in Dieckmann, Code of Civil Procedure section 474 allows “a plaintiff in good faith to delay suing particular persons as named defendants until he has knowledge of sufficient facts to cause a reasonable person to believe liability is probable.” (Id. at 363.) Additionally, Dieckmann provides that the distinction between some “suspicion” that a cause of action could lie against a defendant and “factual basis” to believe that this is true is important for Code of Civil Procedure section 474, such that only the latter requires substituting in the party as a defendant. (Id.)

   The court notes that Ownzones and Goman’s proposed cross-complaint, attached as Exhibit 4 to the Klein Declaration, includes many allegations about Nahai and ANCS’ alleged involvement in Genesis’ conduct at issue in this action. For example, the proposed cross-complaint indicates that Genesis “acted with the help” of Nahai and ANCS, and that the FAC was in part an attempt to allow Nahai and ANCS to avoid their contractual obligations. (Klein Decl., Ex. 4, ¶¶ 1, 10.) Additionally, this proposed cross-complaint alleges that Nahai made specific representations to Ownzones and Goman about his involvement. (Klein Decl., Ex. 4, ¶¶ 37, 38.) The court further notes that the cross-complaint actually filed on December 5, 2018 removes most of these allegations about Nahai and ANCS. The cross-complaint briefly alleges that Nahai, acting through ANCS, was allegedly authorized to review business decisions on behalf of Genesis. (Cross-Complaint, ¶ 9.) Additionally, Nahai was allegedly involved in weekly telephone meetings regarding the business dealings between the parties. (Id., ¶ 30.)

   Based on the descriptions of Nahai and ANCS’ conduct in the proposed cross-complaint, the court is not persuaded by Ownzones and Goman’s attempt to draw a distinction between merely knowing of Nahai and ANCS’ identities and knowing “actual facts” which give rise to their potential liability as cross-defendants. Ownzones and Goman do not dispute that they transmitted the proposed cross-complaint a few months prior to filing their cross-complaint and simply contend that nevertheless, Code of Civil Procedure section 474 should be liberally construed to permit the roe amendments as to Nahai and ANCS. However, a review of the proposed cross-complaint demonstrates that Ownzones and Goman had knowledge of actual facts regarding Nahai and ANCS’ involvement in this action, since the proposed cross-complaint describes Nahai’s involvement and alleged representations in some detail. Ownzones and Goman also offer no explanation for why the cross-complaint they actually filed removed the more detailed factual allegations about Nahai and ANCS.

   Thus, the court finds that Ownzones and Goman were not “ignorant” for purposes of amending their cross-complaint to add Nahai and ANCS pursuant to Code of Civil Procedure section 474. For these reasons, Genesis’s motion is granted. Nahai and ANCS’ motion is granted. the court orders Ownzones and Goman’s March 3, 2020 roe amendments stricken.

   Having granted Genesis, Nahai and ANCS’ motions on this basis, the court does not reach the remainder of the parties’ arguments.

2. Order to Show Cause Regarding Sanctions

   Nahai and ANCS request an order to show cause why sanctions should not be imposed against Ownzones and Goman pursuant to California Rules of Court, Rule 3.110. Pursuant to this rule, if a party files a cross-complaint which adds new parties, “the cross-complaint must be served on all parties and proofs of service on the new parties must be filed within 30 days of the filing of the cross-complaint.” (Cal. Rules of Court, Rule 3.110, subd. (c).) Additionally, the court “may” set an order to show cause why sanctions should not be imposed if a party fails to file and serve pleadings within the time limits required by this section. (Cal. Rules of Court, Rule 3.110, subd. (f).)

   Nahai attests in support of this request that he was served with the cross-complaint as an individual and on behalf ANCS on April 13, 2020. (Nahai Declaration in Support of Nahai Motion, ¶ 4.)

   In opposition, Ownzones and Goman contends that Nahai and ANCS’s request must be denied because service was performed only 11 days beyond the deadline set forth in California Rules of Court, Rule 3.110 and any delay was due to Nahai and ANCS dodging service. (Opp Nahai Motion, 6-7; Calkins Decl., Exs. A-B.)

   The court agrees with Ownzones and Goman that no order to show cause regarding sanctions is warranted. Nahai and ANCS do not argue that they have been prejudiced by a delay in service of 11 days beyond the 30 day deadline imposed by California Rules of Court, Rule 3.110. Additionally, Ownzones and Goman have submitted evidence demonstrating a reason for the relatively minor delay in service. For these reasons, the court declines to set an order to show cause hearing.

   Conclusion

   Genesis’s motion is granted. Nahai and Alex Nahai Consulting’s motion is granted. the court orders Ownzones and Goman’s March 3, 2020 roe amendments stricken. Moving parties to give notice.

Case Number: ****6021    Hearing Date: November 25, 2020    Dept: 37

HEARING DATE: November 25, 2020

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

TRIAL DATE: None

MOTION: Motion to Compel Further Deposition of Alex Nahai

MOVING PARTIES: Defendants Ownzones Media Network, Inc. and Dan Goman

OPPOSING PARTY: Cross-Defendant Alex Nahai

PROOF OF SERVICE: OK

OPPOSITION: March 4, 2020

REPLY: March 10, 2020

TENTATIVE: Moving Defendants’ motion is denied as to questions about communications between Nahai and Klein, as further outlined in the instant ruling. Moving Defendants’ motion is otherwise granted. Moving Defendants are to meet and confer with Nahai in order to schedule a mutually convenient date for the second session of Nahai’s deposition to be completed within the next 60 days. The deposition may be conducted remotely. Moving Defendants are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman.

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.

On December 5, 2018, Ownzones filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.

On February 28, 2020, the Honorable Georgina T. Rizk granted Ownzones and Goman’s Motion to Compel Third Party, Alex Nahai (“Nahai”), to produce documents and a privilege log. Sanctions were also awarded against Nahai in the amount of $3,500.

Ownzones and Goman (“Moving Defendants”) now move for an order compelling a further deposition of Nahai. Nahai opposes the motion.

Meet and Confer

A motion to compel deposition must be accompanied by a good faith meet and confer declaration under section 2016.040 or, “when the deponent fails to attend the deposition and produce the documents, electronically stored information, or things described in the deposition notice, by a declaration stating that the petitioner has contacted the deponent to inquire about the nonappearance.”  (Code Civ. Proc., ; 2025.450, subd. (b)(2).)  A declaration under section 2016.040 must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion.  (Code Civ. Proc., ; 2016.040.)  

Moving Defendants submit the declaration of their counsel, Neil Thakor (“Thakor”) to demonstrate that they have fulfilled their statutory meet and confer obligations prior to filing the instant motion. Thakor attests that on December 20, 2019, he sent a meet and confer letter to Nahai’s attorney, Alex Tabolsky (“Tabolsky”) outlining the issues raised in the instant motion about improper instructions given at the deposition and the lack of document production. (Thakor Decl. ¶ 3, Exhibit D.) Thereafter, Tabolsky allegedly asked for 2 extensions of time in which to respond to the meet and confer letter and reciprocally extended Moving Defendants’ deadline to file the instant motion. (Thakor Decl. ¶¶ 6-7.) The latest agreed upon deadline was for Tabolsky to have until January 24, 2020 to respond to the meet and confer letter and for Thakor to file the instant motion by February 3, 2020. (Id.) Further, according to Thakor, Tabolsky later claimed that he could not respond to the meet and confer letter until January 31, 2020, which was not agreed to and further, Tabolsky allegedly falsely claimed that his inability to respond was because he did not have a copy of Nahai’s deposition transcript. (Thakor Decl. ¶¶ 8-9; Exhibit E.)

In opposition, Nahai contends that Moving Defendants failed to properly meet and confer prior to filing the instant motion. Specifically, Tabolsky attests that Thakor failed to respond to his request of January 24, 2020 for additional time to respond to Thakor’s meet and confer letter. (Tabolsky Decl. ¶ 6.) Additionally, Tabolsky attests that on January 31, 2020, he repeatedly attempted to reach Thakor by phone but was repeatedly unsuccessful. (Tabolsky Decl. ¶ 7.) Finally, Thakor allegedly emailed Tabolsky on February 3, 2020 indicating that he would provide “one last extension of time” but also filed his motion to compel on the same day. (Tabolsky Decl. ¶ 9.) Thereafter, Tabolsky attests that on February 4, 2020 he offered to produced Nahai for a second session of deposition, but that he did not receive a response to this offer. (Tabolsky Decl. ¶ 10; Exhibit 1.) Tabolsky’s letter only indicated as follows with regard to the second session of Nahai’s deposition:

“Second, Mr. Nahai will disclose the names of Genesis Media’s investors in a second session of his deposition. Please let us know if your office is available for a second session in the next 2-3 weeks. We have reached out to Mr. Nahai and requested that he identify available dates for a second session within the next 2-3 weeks. Once we have available dates, we will send them to you forthwith.”

(Tabolsky Decl., Exhibit 1 at p. 2.)

The court finds the Thakor Declaration sufficient for purposes of Code of Civil Procedure section 2025.450. The December 20, 2019 meet and confer letter sufficiently outlines Moving Defendants’ arguments raised in the instant motion. Tabolsky’s argument that Moving Defendants failed to meaningfully meet and confer by failing to respond to his January 24, 2020 request for an extension is unavailing. The January 24, 2020 request is the second request for an extension and Moving Defendants had no obligation to grant it.

Discussion

1. Legal Standard

   Code of Civil Procedure, section 2025.450, provides in relevant part:

   (a)  If, after service of a deposition notice, a party to the action or an officer, director, managing agent, or employee of a party, or a person designated by an organization that is a party under Section 2025.230, without having served a valid objection under Section 2025.410, fails to appear for examination, or to proceed with it, or to produce for inspection any document, electronically stored information, or tangible thing described in the deposition notice, the party giving the notice may move for an order compelling the deponent’s attendance and testimony, and the production for inspection of any document, electronically stored information, or tangible thing described in the deposition notice.  

   (Code Civ. Proc., ; 2025.450, subd. (a).)  The motion must set forth specific facts justifying the production for inspection of any document, electronically stored information, or tangible thing described in the deposition notice.  (Id. ; 2025.450, subd. (b)(1).)   

2. Analysis

Moving Defendants contend that Nahai should be ordered to sit for a second deposition and testify as to the following six questions: (1) which of his companies hold attorney/client privilege with Robert Klein (“Klein”), counsel for Genesis, (2) how Nahai searched for responsive documents, (3) communications among Klein, Misle, and Nahai, (4) communications between Nahai and Klein, (5) notices of termination, (6) whether Nahai searched produced comments regarding notices of termination. The court will analyze the parties arguments separately for each question.

1. Attorney Client Privilege with Klein

Moving Defendants asked Nahai to respond to the following question, which Tabolsky ultimate instructed him not to answer:

Q. Okay. That's what I was going to get at. What other companies [of yours] have an attorney/client relationship with Mr. Klein?

(Thakor Decl., Exhibit C (Nahai Depo) at p. 65:23-68:5.) Tabolsky objected that this question was improper as calling for a legal conclusion, argumentative, and for information which may infringe upon attorney-client privilege. Nahai had earlier been allowed to respond that he had formed a relationship with Klein both as an individual and on behalf of his company, Alexa Nahai Consulting Services. (Id. at pp. 62:13-65:22.)

Moving Defendants contend that they are entitled to a further response to this question because, as an initial matter, Nahai has not established that an attorney-client privilege existed between Nahai and/or his companies and Klein. (Separate Statement in Support of Motion, 2.) Additionally, Moving Defendants contend there is nothing privileged about the identity of the company that holds the attorney-client privilege, pursuant to Code of Civil Procedure, section 2031.240, subdivision (c)(1). (Id. at 2-3.) This section provides that “If an objection is based on a claim of privilege or a claim that the information sought is protected work product, the response shall provide sufficient factual information for other parties to evaluate the merits of that claim, including, if necessary, a privilege log.”

In opposition, Nahai contends that Moving Defendants’ motion must be denied as to this question because Nahai has established that an attorney-client relationship existed between at least himself and Klein as well as Alex Nahai Consulting Services and Klein. (Opposition, 5-6.) However, Nahai does not address Moving Defendants’ argument that the instant question is not privileged under Code of Civil Procedure section 2031.240.

The court agrees with Moving Defendants that the instant question is not privileged. First, Nahai has established that he had formed an attorney-client relationship with Klein. Thus, Nahai has established that he was a holder of the attorney-client privilege with Klein. Second, Nahai was earlier permitted by his counsel to answer an almost identical question and did so by identifying Alex Nahai Consulting Services as a company that also holds attorney-client privilege with Klein. As such, the court finds that the instant question is not privileged because it is a simple follow-up question which asks, on its face, for Nahai to disclose if he had any other companies which also formed an attorney-client relationship with Klein. Nahai has not demonstrated how such a question is privileged, as it seeks “factual information” for Moving Defendants to evaluate Nahai’s claim of privilege.

For these reasons, Moving Defendants’ motion is granted as to question 1.

1. Search for Responsive Documents

Moving Defendants contend that Nahai must be ordered to further testify as to the following:

Q You said a moment ago that you can remember some of the names of the investors of Genesis; right? Yes?

A Yes. Yes. Sorry.

Q Did you use those names as search terms?

A To the extent that I could remember them at the time, then I would have tried to comply.

Q And which names were those?

(Tr., 82:4-11)

Moving Defendants contend that Nahai should be ordered to testify and respond to this question because there is nothing privileged about the names of Genesis’ investors. (Opposition, 6.) Moving Defendants also contend that because Genesis had previously disclosed most of the investors’ names, Nahai’s refusal to respond to this question constitutes obstructionist behavior. (Id.)

In opposition, Nahai contends that the motion should be moot as to this question because Nahai had offered to sit for a second deposition regarding this question and his offer had not been responded to. (Opposition, 6-7.) In reply, Moving Defendants contend that the motion is not moot because the main issues in the motion are regarding Nahai’s improper claim of attorney client privilege.

Moving Defendants’ motion is granted as to this question. It appears that Nahai has agreed to appear and further testify to this question. It also appears that Nahai argues that the motion should be deemed moot on this basis. Because such an agreement does not moot the motion, the motion is granted as to this question.

1. Communications Among Klein, Misle, Nahai

“Confidential communication between client and lawyer” for purposes of the attorney-client privilege means information which, “so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted.” (Evidence Code ; 952.) The “ “involvement of an unnecessary third person in attorney-client communications destroys confidentiality [emphasis original][citations].”” (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, 1503.)

Moving Defendants contend that Nahai should be ordered to further testify as to the following question:

Q: Okay. And what do you remember about that conversation [amongst you, Klein, and Misle]?

(Thakor Decl., Exhibit C at p. 118:6-7.) Klein objected to this question on the grounds that it called for attorney-client privileged information and Tabolsky instructed Nahai not to answer. (Id. at pp. 118:8-120:17.)

Moving Defendants contend that Nahai should be ordered to further testify as to this question because Nahai has not established that attorney-client privilege applies as to him and Klein. (Separate Statement in Support of Motion, 8-9.) Additionally, Moving Defendants contend that even if Nahai and Klein had an attorney-client relationship, the presence of Misle, an unnecessary third party, destroys the attorney-client privilege. (Id.)

In opposition, Nahai contends that Moving Defendants’ motion should be denied as to this question because Nahai, Misle and Klein were all allegedly joint-holders of the attorney-client privilege. Nahai cites to pages 118-121 of his deposition transcript as evidence that he allegedly claimed this privilege during the course of deposition. (Opposition, 6.) The court has reviewed these pages and finds that they do not support Nahai’s argument. Instead, pages 118-121 only include various counsel present discussing the application of the attorney-client privilege.

Nahai has not claimed or otherwise demonstrated how Misle is a necessary third party. Instead, Nahai argues that Misle also held the attorney-client privilege but submits no evidence or authority in support of this argument. Such an argument fails.

Thus, Moving Defendants’ motion is granted as to this question.

1. Communications Between Nahai and Klein

“Where the lawyer-client relationship exists, the client may refuse to disclose, and prevent others from disclosing, a confidential communication between the client and the lawyer.” (American Mut. Liab. Ins. Co. v. Superior Court (1974) 38 Cal.App.3d 579, 593.) The policy behind the attorney-client privilege supports a liberal construction of the privilege. (Id.) Further, the client is the holder of the attorney-client privilege. (Evidence Code ; 951, 954, subd. (a).)

Moving Defendants contend that Nahai should be ordered to further testify as to the following question:

Q. Tell me what questions Mr. Klein asked you.

(Separate Statement in Support of Motion, 9-10; Transcript, p. 231:4-6.) Tabolsky objected to this question on the grounds that it calls for attorney-client privileged information and instructed Nahai not to answer. (Id.)

Moving Defendants contend that Nahai should be ordered to further testify as to this question because Nahai has not established that an attorney-client relationship existed between himself and Klein as he was “unable to answer basic questions regarding the scope of privilege between himself (and/or his “companies”) and Klein.” (Opposition, 10.)

As discussed above, Moving Defendants asked whether Nahai formed an attorney-client relationship with Klein, to which Nahai affirmatively responded. Moving Defendants do not demonstrate why Nahai’s testimony is insufficient to establish that attorney-client privilege attached to his relationship with Klein, or that Nahai was required to answer “Basic questions” in order to establish that the privilege existed.

For these reasons, Moving Defendants’ motion is denied as to this question.

1. Notices of Termination

Moving Defendants contend that Nahai should be ordered to further testify as to the following question:

MR. TABOLSKY: So there was one thing that my client wanted to go back to. There were questions or a question regarding his involvement the termination notice. Can you please repeat the question? […]

MR. TABOLSKY: He just wants to make sure that his answer was correct.

THE WITNESS: Yeah, I'll clarify. So the problem is these events were a while ago. So I want to make sure I'm -- that I haven't –

MR. THAKOR: And I appreciate that.

THE WITNESS: Yeah. So to the best of my recollection, [Klein] called me and was asking me questions about, you know, the events that occurred. I can't say for certain because I don't have the termination notice in front of me, but I can't say for certain whether the termination letter that he prepared was based on my answers. I also can't remember whether provided comments to the letter that he had prepared. […]

MR. THAKOR: What were the questions that Mr. Klein asked you?

(Thakor Decl., Exhibit C at pp. 269:19-270:25, 274:1-6.) Tabolsky objected that this question called for attorney-client privileged information and instructed Nahai not to answer.

Moving Defendants contend that Nahai should be ordered to further testify as to this question because (1) the information responsive to this question arose during the course of Klein’s attorney-client relationship with Genesis, not Nahai and as such, Nahai cannot claim it is privileged and, (2) assuming that the information is attorney-client privileged, Nahai waived the privilege by voluntarily testifying as to some information regarding this communication. (Separate Statement in Support of Motion, 13-14.)

In opposition, Nahai contends that Moving Defendants’ motion should be denied as to this question because Nahai, as a “business associate” to Genesis, “undoubtedly was present with Mr. Klein, Genesis Media’s attorney, to further the interest of the Genesis Media on a matter of joint concern.” (Opposition, 6.)

Pursuant to Evidence Code section 912, subdivision (a), the holder of attorney-client privilege has waived the privilege if he, without coercion, as “disclosed a significant part of the communication or has consented to disclosure made by anyone.” Based on the evidence submitted by the parties, including excerpts from Nahais’s Deposition submitted through the Thakor Declaration, the court finds that the Evidence Code section 912, subdivision (a) applies to this question. Specifically, it is evident from this question that Nahai has, without coercion, voluntarily asked to go back to this question in order to divulge more information about communications regarding the termination notice. The court finds that Nahai’s testimony sufficiently constitutes disclosing a “significant part” of the communications with Klein such that attorney-client privilege does not apply to bar him from having to disclose the remaining parts.

For these reasons, Moving Defendants’ motion is granted as to this question.

1. Whether Nahai Searched for Comments re Notices of Termination

Moving Defendants contend that Nahai should be ordered to further testify as to the following question:

Q When you searched for documents in this case, did you look for any comments that you provided to the notice of termination?

(Separate Statement in Support of Motion, 14.) Tabolsky objected to this question on the grounds that it called for attorney-client privileged information and asked Nahai not to respond. (Id. at 14-15.)

The parties make almost identical arguments in support of and in opposition to Moving Defendants’ motion as with question 5. For the reasons stated above with respect to question 5, Moving Defendants’ motion is granted.

1. Monetary Sanctions

Code of Civil Procedure, section 2025.450, subdivision (g) requires the court to impose a monetary sanction in favor of the party who noticed the deposition and against the deponent or the party with whom the deponent is affiliated, “unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”  (Code Civ. Proc., ; 2025.480, subd. (j).)

Moving Defendants request $10,500 in sanctions in connection with this motion. Nahai contends that no sanctions should be awarded against him and contends that instead, $4,937.50 in sanctions should be awarded against Moving Defendants.

The court does not award sanctions. Both parties’ conduct contributed to this motion such that any award of sanctions would be unjust.

Conclusion

Moving Defendants’ motion is denied as questions about communications between Nahai and Klein, as further outlined in the instant ruling. Moving Defendants’ motion is otherwise granted. Moving Defendants are to meet and confer with Nahai in order to schedule a mutually convenient date for the second session of Nahai’s deposition to be completed in the next 60 days. The deposition may be conducted remotely. Moving Defendants are to give notice.

Case Number: ****6021    Hearing Date: November 06, 2020    Dept: 37

HEARING DATE: November 6, 2020

CASE NUMBER: ****6021

CASE NAME: Genesis Media LLC vs. Ownzones Media Network Inc. et al

MOVING PARTIES: Plaintiff/Cross-Defendants, Genesis Media LLC and Howard Misle

OPPOSING PARTIES: Defendants/Cross-Complainants, Ownzones Media Network, Inc. and Dan Goman

TRIAL DATE: February 22, 2022

PROOF OF SERVICE: OK

MOTION: Genesis and Misle’s Motion for Protective Order Restricting Discovery and Imposing Monetary Sanctions

OPPOSITION: October 26, 2020

REPLY: October 27, 2020

TENTATIVE: Genesis and Misle’s motion for protective order is GRANTED, in part. The parties must meet and confer to schedule the deposition to be taken within 45 days. Misle is to attend the deposition. The deposition shall be taken remotely. The topics of the deposition shall be as noticed in the Amended Deposition Notice. To the extent that any requested documents were produced to Ownzones, those documents need not again be produced. The parties’ request for sanctions is DENIED. Genesis is to give notice.

__________________

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Genesis’ Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis, Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, and (7) declaratory relief against Ownzones and Goman.

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.

On December 5, 2018, Ownzones filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation, and (4) misrepresentation.

On June 9, 2020, Ownzones served Genesis and Defendants Alex Nahai and Alex Nahai Consulting Services, Inc. a Notice of Videotaped Deposition of Belmeko LLC’s Person Most Knowledgeable and Request for Production of Documents. The deposition was noticed for June 26, 2020 at Greenspoon Marder LLP in Las Vegas, Nevada.

Genesis now moves for a protective order that the deposition of Belmeko LLC’s most knowledgeable person, Misle, not be taken and/or be restricted. Ownzones and Goman oppose the motion.

Meet and Confer

A motion for a protective order under Code of Civil Procedure, section 2025.420 must be accompanied by a meet and confer declaration. (Code Civ. Proc., ; 2025.420, subd. (a).) 1 The declaration must state facts showing a reasonable and good faith attempt at an informal resolution of each issue presented in the motion. (Code Civ. Proc., ; 2016.040.) “[A] reasonable and good faith attempt at informal resolution entails something more than bickering with [opposing] counsel…. Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate.” (Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.) “A determination of whether an attempt at informal resolution is adequate involves the exercise of discretion.” (Stewart v. Colonial W. Agency (2001) 87 Cal.App.4th 1006, 1016, internal ellipses omitted.) Where a party fails to make any real effort at informal resolution, a particularly egregious failure may justify an immediate and outright denial of further discovery. (Obregon v. Superior Court (1998) 67 Cal.App.4th 424, 433-34, citing Townsend v. Superior Court (1998) 61 Cal.App.4th 1431, 1437.)

Genesis submits a declaration from its counsel, Robert G. Klein (“Klein”), to demonstrate that it has fulfilled their statutory meet and confer obligations prior to filing the instant motion. Klein attests that he sent a series of emails to Ownzones and Goman’s counsel, Rebecca Lawlor Calkins, in an attempt to meet and confer before filing the instant motion. (Klein Decl., ¶ 15, Exhibit 13.) Specifically, Klein emailed Ms. Calkins on June 10 and 11, 2020 regarding issues in the Amended Deposition Notice, which gave rise to the instant motion. (Id.) Ms. Calkins did not respond. (Id.) Additionally, in the reply, Klein submitted a Supplemental Meet and Confer Declaration, which demonstrates Klein’s attempts to informally resolve the matter at issue. (Reply, Exhibit 3.)

The declarations of Robert G. Klein are sufficient for purposes of Code of Civil Procedure, section 2025.420.

Discussion

Code of Civil Procedure, section 2025.420, subdivision (a) provides, in relevant part: “Before, during, or after a deposition, any party, any deponent, or any other affected natural person or organization may promptly move for a protective order.” (Code Civ. Proc., ; 2025.420, subd. (a).) “The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.” (Id., ; 2025.420, subd. (b).) “The court shall limit the scope of discovery if it determines that the burden, expense, or intrusiveness of that discovery clearly outweighs the likelihood that the information sought will lead to the discovery of admissible evidence.” (Code Civ. Proc., ; 2017.020.)

The burden of proof is generally on the party seeking the protective order to show ;good cause ;for whatever order is sought. ;(Fairmont Ins. Co. v. Superior Court ;(2000) 22 Cal.4th 245, 255.)  The concept of good cause requires a showing of specific facts demonstrating undue burden, etc., and justifying the relief sought. ; ;(See ;Goodman v. Citizens Life & Casualty Ins. Co. ;(1967) 253 Cal.App.3d 807, 819.) ; ;The facts are normally established in declarations by counsel for the party seeking the protective order. ; ;The declaration must contain competent evidence - i.e., first-hand knowledge of the facts. ; ;Hearsay allegations ;on information and belief ;and conclusory statements that particular relief is ;necessary ;are not enough. ; ;(Id.) 

Genesis contends a protective order is warranted because: (1) deposition was noticed after the discovery cut-off date of May 11, 2020; (2) the topics mostly do not pertain to Belmeko, but are related to Genesis, and Ownzones has deposed Misle four times for a total of 14 hours; (3) the deposition violates the lockdown orders imposed due to COVID-19 because it requires the deponent to attend the deposition in Las Vegas; (4) there is a pending motion for a protective order, but not ruled upon, in response to Ownzones’ original notice of Belmeko’s deposition; (5) there is a pending motion for summary adjudication to dispose of Ownzones’ first amended cross-complaint; and (6) the request for documents is oppressive and overbroad.

Specifically, Genesis avers that Belmeko is a holding company created by Misle; it has no business purpose; it has no documents and had no involvement in the litigation between Genesis and Ownzones; and taking of Belmeko’s deposition is a ruse by Ownzones to take another deposition of Misle in violation of Code of Civil Procedure ; 2025.290.

As to the discovery cut-off date of May 11, 2020, Genesis avers that the cut-off date has not been continued by the court, and that the May 13, 2020 Los Angeles Superior Court General Orders was issued after the court has already continued the trial date and did not extend the discovery cut-off date. (Motion, p.8:13-16.)

Genesis requests: (1) the deposition not be taken at all; (2) the deposition be conducted by video conference; (3) the deposition topics be limited and the duration no more than two hours; (4) the requested documents not be produced. (Opposition, p.8-10.)

In opposition, Ownzones contends that this court has already rejected the position that the discovery cut-off date was May 11, 2020 during the September 23, 2020 hearing on Nahai’s motion for reconsideration. (Opposition, p.11:6-10.) Additionally, Ownzones contends that the Los Angeles Superior Court General Orders specifically provide that all dates were extended, and this court confirmed “its correct understanding of this issue during the September 23, 2020 hearing.” (Id.) Ownzones further contends that Genesis’ request that the deposition be taken with the deponent alone at home is moot because it has agreed to depose Belmeko’s PMK remotely and alone at home. (Opposition, p.12:1-2.)

Furthermore, Ownzones contends that this court rejected Genesis’ argument that it should be denied any discovery due to a pending motion for summary judgment. Ownzones contends that there is no authority, declaration, or support to limit the deposition to topics of Belmeko’s choosing. Ownzones contends that there is no authority to support limiting the scope of examination because “Belmeko just doesn’t feel like going into those matters.” (Opposition, p.12:19-20.) Additionally, Ownzones contends that Klein does not identify which document requests would include personal banking records of Misle, and even if the request did seek the personal banking records of Misle, “this and other courts have already made it clear that such records are vital to establishing Misle and Genesis” conduct that is the basis for Genesis’ lawsuit. (Opposition, p.12:24-26.) Ownzones further contends that Genesis’ conclusory statement that the requests are oppressive and burdensome fail. Ownzones contends that Belmeko’s argument that it does not have possession or control over the documents relating to the management of Genesis is an attempt to conceal relevant discovery. Lastly, Ownzones contends that the motion should be denied because Genesis failed to meet and confer prior to filing the instant motion.

In reply, Genesis argues Ownzones has already deposed Misle four times for more than 14 hours and seeks to again depose Misle without a motion as required by Code of Civil Procedure ; 2025.290. Additionally, Genesis argues that Belmeko’s only relationship to Genesis is that it is a Class A Member of Genesis and Misle is listed as its managing member. (Reply, p.2:8-10, Exhibit 1.) Ownzones sought to depose Belmeko’s person most knowledge, Misle, because Misle is the person at Genesis who was involved in its daily operations. However, if this were truly the deposition of Belmeko, the deposition would not reveal anything new that was not already disclosed in Misle’s prior depositions. Genesis further contends the topics were already inquired into at Misle’s prior depositions and the documents were already also provided. Genesis clarified its instant request that the restrictions are to avoid questions about Misle’s personal assets and limit the deposition to two hours. (Reply, p.7:1-2.)

The court already found that Genesis’s meet and confer was adequate.

The court rejects Genesis’ contention that the deposition was noticed beyond the discovery cut-off date. The General Order of April 14, 2020 provides that continuance of trial dates due to the COVID-19 pandemic automatically extended deadlines based on the trial date to the new trial date. On April 16, this trial was continued, which continued the discovery cut off. By a minute order of June 12, 2020, the case was reassigned to Department 37 and all matters on calendar were vacated to be reset by that department. In response, the court had a case management conference and set instant trial date to February 22, 2022. (See September 23, 2020 Case Management Order.) The court finds the notice of deposition is timely.

Here, Belmeko designated Misle as its person most knowledgeable. (Motion, p.2:12-13.) Belmeko is a Class A member of Genesis and Misle is Belmeko’s managing member. (Reply, p.2:8-10, Exhibit 1.) Thus, Ownzones may depose Misle to discover relevant evidence to litigate its case. However, as it seems Ownzones has already deposed Misle four times for 14 hours, albeit the prior depositions were related to Genesis, the court finds good cause to grant limited protective order. As Ownzones asserts, it is willing to conduct the Belmeko’s person most knowledgeable remotely with him at home and alone. (Opposition, p.12:1-2.) The only remaining issues are the two-hour time limit and Misle’s personal financial records.[1] The court does not find good cause to limit the deposition to two hours because Ownzones has never deposed Belmeko’s person most knowledgeable. Additionally, the court has reviewed the Amended Deposition Notice and finds that the topics and requested documents are related to Belmeko’s relationship with Genesis. (Motion, Exhibit 1.) The court denies Genesis’ request that the deposition be not taken at all.

Because Code of Civil Procedure section 2025.420 vests the court with discretion to issue any protective order “that justice requires,” to protect a party—in this case, Misle. the court grants Genesis’ motion, in part, and orders as follows: The parties must meet and confer to schedule the deposition to be taken within 45 days. Misle is to attend the deposition. The deposition shall be taken remotely. The topics of the deposition shall be as noticed in the Amended Deposition Notice. To the extent that any requested documents were produced to Ownzones, those documents need not again be produced.

Monetary Sanctions

Code of Civil Procedure, section 2017.020, subdivision (b) requires the court to impose a monetary sanction “against any party, person, or attorney who unsuccessfully makes or opposes a motion for a protective order, unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.” (Code Civ. Proc., ; 2017.020, subd. (b).)

Genesis request an award of sanctions in the amount of $8,519.80. Ownzones request an award of sanctions in the amount of $6,500.00. The court finds sanctions are not warranted. The court finds both parties acted with substantial justification in making and opposing the instant motion.

Sanctions are denied in whole.

Conclusion

Genesis’ motion for protective order is GRANTED, in part. The court issues a protective order as set forth above. The parties must meet and confer to schedule the deposition to be taken within 45 days. Misle is to attend the deposition. The deposition shall be taken remotely. The topics of the deposition shall be as noticed in the Amended Deposition Notice. To the extent that any requested documents were produced to Ownzones, those documents need not again be produced. The parties’ request for sanctions is DENIED. Genesis is to give notice.

Case Number: ****6021    Hearing Date: September 23, 2020    Dept: 37

HEARING DATE: September 23, 2020

CASE NUMBER: ****6021

CASE NAME: Genesis Media, LLC v. Ownzones Media Network, Inc., et al.

TRIAL DATE: None

MOTION: Third Party Alex Nahai’s Motion for Reconsideration of February 28, 2020 Order

MOVING PARTY: Third Party Alex Nahai

OPPOSING PARTIES: Defendants Ownzones Media Network, Inc. and Dan Goman

PROOF OF SERVICE: OK

OPPOSITION: June 12, 2020

REPLY: None as of September 21, 2020

TENTATIVE: Alex Nahai’s Motion for Reconsideration is DENIED. Defendants are to give notice.

Background

This action arises out of a Strategic Alliance Agreement (“Agreement”) between Plaintiff, Genesis Media, LLC (“Genesis”) and Defendant, Ownzones Media Network, Inc. (“Ownzones”). Plaintiff’s Complaint alleges that Genesis and Ownzones entered into the Agreement to form a cannabis-focused media business on or about May 22, 2017, which required Genesis to tender $3.1 million as a deposit to commence the business. According to Genesis Ownzones and Defendant Dan Goman (“Goman”) engaged in fraudulent misrepresentations in connection with their work on the Agreement, failed to produce a proper accounting, and refused Genesis’ informal notice of termination.

Genesis’ Complaint alleges the following causes of action: (1) breach of contract against Ownzones, (2) rescission and restitution based upon fraud against Ownzones, (3) breach of fiduciary duty against Ownzones, (4) conversion against Ownzones and Goman, (5) claim and delivery against Ownzones and Goman, (6) accounting against Ownzones and Goman, (7) declaratory relief against Ownzones and Goman.

On June 18, 2018, Genesis filed a First Amended Complaint. (“FAC”) The FAC alleges the same seven causes of action.

On December 5, 2018, Ownzones filed a cross-complaint against Genesis and cross-defendant, Howard Misle, (“Misle”) alleging that Genesis and Misle failed to pay the agreed amount for services. Ownzones’ cross-complaint alleges four causes of action for: (1) breach of contract, (2) promissory fraud, (3) intentional misrepresentation and (4) misrepresentation.

On February 28, 2020, the Honorable Georgina T. Rizk granted Ownzones and Goman’s Motion to Compel Third Party, Alex Nahai (“Nahai”), to produce documents and a privilege log. Sanctions were also awarded against Nahai in the amount of $3,500.

Nahai now moves for reconsideration of Judge Rizk’s February 28, 2020 order. Ownzones and Goman (“Defendants”) oppose the motion.

Discussion

1. Timeliness

Code of Civil Procedure, section 1008 allows a party to move for reconsideration of an order within 10 days after service upon the party of written notice of entry of the order, based on new or different facts, circumstances, or law. (Code Civ. Proc., ; 1008, subd. (a).)

On February 28, 2020, the clerk served notice of Judge Rizk’s ruling on Defendants’ Motion to Compel by mail. Thus, Nahai’s deadline to file a motion for reconsideration was March 14, 2020. The instant motion was filed on March 13, 2020 and is timely.

1. Analysis

Code of Civil Procedure section 1008 requires the party moving for reconsideration to “state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” However, a party moving for reconsideration under Code of Civil Procedure section 1008 must demonstrate that “new or different facts” in support of the motion could not have been discovered or produced with “reasonable diligence” at the time of the original hearing. (New York Times Co. v. Superior Court (2005) 135 Cal.App.4th 206, 212-13 (“the information must be such that the moving party could not, with reasonable diligence, have discovered or produced it at the [original hearing]”).

Nahai argues that the court should reconsider Judge Rizk’s February 28, 2020 ruling because Judge Rizk’s ruling “failed to take into account all the evidence presented.” (see Motion at p. 1.) The remainder of Nahai’s motion outlines each area where Judge Rizk’s ruling allegedly failed to include evidence presented by Nahai, and repeatedly states that this alleged failure to correctly interpret facts “leads Third Party to the conclusion that this Court does not have a firm understanding of the pertinent facts at issue.” (Motion, 2-6).

Nahai’s motion does not demonstrate compliance with Code of Civil Procedure, section 1008. Specifically, Nahai fails to make any showing that there are “new or different facts” that could not have been discovered or produced at the time of the original hearing. Nahai’s argument that Judge Rizk allegedly failed to account for certain facts fails because Nahai admits that all of these facts were indeed presented at the time of the February 28, 2020 hearing

For these reasons, the court does not reconsider the February 28, 2020 ruling from Judge Rizk. Thus, Nahai’s motion is DENIED. Having denied Nahai’s motion on this basis, the court does not reach the remainder of the parties’ arguments.

Conclusion

Alex Nahai’s motion for reconsideration is DENIED. Defendants are to give notice.

Case Number: ****6021    Hearing Date: January 15, 2020    Dept: 48

MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

MOVING PARTY: Defendants Ownzones Media Network, Inc. and Dan Goman

RESPONDING PARTY(S): Plaintiff Genesis Media, LLC

PROOF OF SERVICE:

• Correct Address: Yes.
• 75/80 (CCP ; 437c(a))): OK. Served by personal service on November 1, 2019 (75 days).

• DENY motion for summary judgment;
• DENY motion for summary adjudication as to Issue No. re: the first cause of action, Issue No. 2 re: the second cause of action, Issue No. 3 re: the fourth cause of action, Issue No. 4 re: the fifth cause of action, and Issue No. 5 re: the seventh cause of action.

ANALYSIS

Defendants’ Evidentiary Objections

Pursuant to CCP ; 437c(q), the Court declines to rule upon Defendants’ objections, which are asserted against evidence which the Court deems not to be material to the disposition of this motion.

Motion For Summary Judgment

For the reasons discussed below, Defendants have not demonstrated that they are entitled to judgment as to all remaining causes of action asserted against them. The motion for summary judgment is DENIED.

The Court will proceed to address the alternative motion for summary adjudication.

Motion For Summary Adjudication

1. Issue No. 1: “DEFENDANTS ARE ENTITLED TO SUMMARY ADJUDICATION ON PLAINTIFF’S FIRST CAUSE OF ACTION FOR BREACH OF CONTRACT BECAUSE PLAINTIFF CANNOT ESTABLISH THAT IT PERFORMED ITS OWN OBLIGATIONS UNDER THE AGREEMENT, OR THAT ANY OF ITS OBLIGATIONS WERE EXCUSED.”

; 5.1 of the Strategic Alliance Agreement (Def’s Exh. 2) provides:

Year One Service Fee. The annual service fee for the Media Business and Channel is US $4,100,00.00 (“Year One Service Fee”) and such amount shall be funded by Genesis and paid to OWNZONES in full within forty-five (45) days of the full execution of this Agreement by the Parties. The Parties approve of the Year One Service Fee set forth on Schedule A attached hereto.

(Bold emphasis added.)

In turn, however, ; 5.1.1 states: “Allocation. The year One Service Fee will be allocated in its entirety to the Services provided by OWNZONES as described in this Agreement.” (Bold emphasis added.)

Schedule A itemizes the $4,100,00 Year One Service Fee as follows: Production ($2,205,000); Technology & Development $1,148,000; Marketing ($507,000); Channel Management (Sales/BD, Programming, Marketing ($240,000).

Further, ; 5.1.4 provides:

In the event that any party hereto determines that additional funding beyond the Year One Service Fee or Subsequent Annual Fee (as defined in Section 5.2.1 below) may be necessary to fulfill any of the Service, the Parties hereto shall discuss a resolution in good faith, with final approval over any decisions made being in the absolute discretion of Genesis and Nahai.

(Bold emphasis added.)

; 6.3 provides that the Parties agreed that they would share in the Content Revenue, Merchandising Revenue, Other Revenue and Media Exploitation Revenue based on whether Genesis has recouped the Recoupment with each party entitled to the percentage revenue share for each category of revenue set forth at ; 6.3.1.

The definition of “Recoupment” at ; 6.1, Page 7 as follows:

“Recoupment” means as of the Effective Date, an amount equal to the Year One Service Fee minus the Sponsorship Amount[1]. Any additional funds contributed by Genesis to the continuing operation of the Media Business and Channel in excess of the Year One Service Fee or for purposes of funding all or a part of any Subsequent Annual Fee will be added to the amount of “Recoupment” on an ongoing and continuing basis.

(Bold emphasis added.)

From the ;; 5.1, 5.1.1, 5.1.4 and Schedule A above, it appears that the $4,100,00.00 Year One Service Fee was to be used entirety to perform the services set forth on Schedule A.

Defendants admit that Genesis paid Ownzones $3.1 million of the $4.1 million Year One Service Fee. UF No. 10. Genesis paid Ownzones $900,000 by the July 6, 2017 payment deadline, and another $2.2 million shortly after the payment deadline, for payments totaling $3.1 million. UF No. 11. To this day, Genesis has not paid Ownzones the remaining $1 million of the Year One Service Fee. UF No. 25.

It is a triable issue of material fact as to whether Plaintiff’s failure to pay the remaining $1 million was a material breach which prevents Plaintiff from seeking to recover for the alleged breach of contract by Defendant Ownzones. For example, the 2AC alleges at ¶ 32, Page 6:14-19 that Ownzones commingled Genesis Media’s funds with its own and used Genesis’ funds for Ownzones operations other than for the Media Business in breach of Section 5.1.1. At the very least, a jury could find that Plaintiff was entitled to performance of at least $3.1 million of the services listed on Schedule A of the Strategic Alliance Agreement.

When a party's failure to perform a contractual obligation constitutes a material breach of the contract, the other party may be discharged from its duty to perform under the contract. (Citations omitted.) Normally the question of whether a breach of an obligation is a material breach, so as to excuse performance by the other party, is a question of fact. (Citations omitted.) Whether a partial breach of a contract is material depends on “the importance or seriousness thereof and the probability of the injured party getting substantial performance.” (Citations omitted.)

. . .  [*279]  . . .

The determination of whether a promise is an independent covenant, so that breach of that promise by one party does not excuse performance by the other party, is based on the intention of the parties as deduced from the agreement. (15 Williston, supra, ; 44:7, pp. 94–96.) . . .  [*280]  . . .

Brown also invokes Restatement Second of Contracts, section 240, which provides, “If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party's performance on his part of such a pair has the same effect on the other's duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised.” (See 13 Corbin on Contracts (rev. ed. 2003) ; 68.4(3)(b), pp. 198–201.) Section 240, comment a of the Restatement Second of Contracts on page 229 provides, “a party's failure to perform may cause him to lose his right to the agreed exchange after he has relied substantially on the expectation of that exchange, as by either preparation or performance. The risk of forfeiture is similar to that which arises on the non-occurrence of a condition stated in the agreement. … But because the failure must be material in order to have this effect … courts can temper the application of those sections in appropriate cases to avoid forfeiture in a way that is not possible where the agreement itself states the condition. … In addition, forfeiture may sometimes be reduced or avoided by allowing a party whose failure has been material to have restitution in accordance with the policy favoring avoidance of unjust enrichment.” (Citations omitted.)

Brown v. Grimes (2011) 192 Cal.App.4th 265, 278-80 (bold emphasis and underlining added).

Defendants’ argument that Genesis’ payment obligation was a condition precedent to Ownzones performance is not persuasively stated, as the Strategic Alliance Agreement does not expressly set forth conditions precedent.

“The existence of a condition precedent normally depends upon the intent of the parties as determined from the words they have employed in the  [*594] contract. [Citation.]” (Realmuto v. Gagnard (2003) 110 Cal.App.4th 193, 199 [1 Cal. Rptr. 3d 569].) But “stipulations in an agreement are not to be construed as conditions precedent unless such construction is required by clear, unambiguous language; and particularly so where a forfeiture would be involved or inequitable consequences would result. [Citations.]” (Alpha Beta Food Markets v. Retail Clerks (1955) 45 Cal.2d 764, 771 [291 P.2d 433] (Alpha Beta Food); see Rubin v. Fuchs (1969) 1 Cal.3d 50, 53 [81 Cal. Rptr. 373, 459 P.2d 925] [contract provisions are not construed as conditions precedent in the absence of language plainly requiring such construction]; City of San Diego v. Haas (2012) 207 Cal.App.4th 472, 493 [143 Cal. Rptr. 3d 438].) Because “such conditions are not favored by the law, [they] are to be strictly construed against one seeking to avail [it]self of them. [Citations.]” (Antonelle v. Lumber Co. (1903) 140 Cal. 309, 315 [73 P. 966].)

JMR Construction Corp. v. Environmental Assessment & Remediation Management, Inc. (2015) 243 Cal.App.4th 571, 593-94 (bold emphasis added).

Accordingly, Defendants have not demonstrated that they are entitled to judgment as to the first cause of action. The burden does not shift to Plaintiff to raise a triable issue of material fact.

The motion for summary adjudication as to Issue No. 1 re: the first cause of action is DENIED.

2. Issue No. 2: “DEFENDANTS ARE ENTITLED TO SUMMARY ADJUDICATION ON PLAINTIFF’S SECOND CAUSE OF ACTION FOR FRAUD BECAUSE PLAINTIFF CANNOT ESTABLISH THAT DEFENDANTS EVER INTENDED TO DECEIVE PLAINTIFF.”

Defendants argue that Plaintiff cannot demonstrate that Ownzones had fraudulent intent because it performed by creating the 420TV channel and applications, to a high standard of quality and desirability.

However, the 2AC pleads Defendant Dan Gorman’s alleged verbal representation on March 23, 2017 (¶ 40) as to Ownzones’ intended use of the $3.1 million Year One Service Fee—allocation entirely to the services provided by Ownzones as described in the Agreement (¶ 41(f))—was false in that Ownzones knew at the time such representations were made that Ownzones intended to use part of those funds for purposes unrelated to the Project (¶ 50(e)); that Ownzones was not capable and had no intention of producing 9 multi-episodic services within the budget (¶ 50(h)), and that Ownzones would only be providing technical services related to the channel, not production of content services (¶ 50(j). ¶ 55 alleges that after Plaintiff gave Ownzones $3.1 million, Plaintiff learned that Ownzones’ representations were false. The 2AC alleges that had Plaintiff known the true facts, it would never have entered into the Agreement. ¶ 53.

Defendant’s evidence only goes to the 420TV application. UF Nos. 28 – 29; 33. It is true that ; 1.1.1 of the Strategic Alliance Agreement may be construed to deal with providing content management and distribution services for the Media Business and Channel using Ownzones’ proprietary platform. However, Ownzones was also obligated to be “[t]he primary, exclusive producer of content and programming (including without limitation, audiovisual content and editorial) for the Media Business and the Channel” Per ; 1.1.2. Defendant does not cite evidence demonstrating that it lacked fraudulent intent as to this promise at the time it entered into the Strategic Alliance Agreement.

Accordingly, Defendants have not demonstrated that they are entitled to judgment as to the second cause of action. The burden does not shift to Plaintiff to raise a triable issue of material fact.

The motion for summary adjudication as to Issue No. 2 re: the second cause of action is DENIED.

3. Issue No. 3: “DEFENDANTS ARE ENTITLED TO SUMMARY ADJUDICATION ON PLAINTIFF’S FOURTH CAUSE OF ACTION FOR CONVERSION BECAUSE PLAINTIFF CANNOT ESTABLISH THAT IT HAS ANY OWNERSHIP INTEREST IN ALLEGED CONVERTED ITEMS.”

and

4. Issue No. 4: “DEFENDANTS ARE ENTITLED TO SUMMARY ADJUDICATION ON PLAINTIFF’S FIFTH CAUSE OF ACTION FOR CLAIM AND DELIVERY BECAUSE PLAINTIFF CANNOT ESTABLISH THAT IT HAS ANY OWNERSHIP INTEREST IN ALLEGED CONVERTED ITEMS.”

Defendants argue that Plaintiff’s claim for conversion and claim and delivery fail because Plaintiff cannot establish that it has an ownership right in any of the various items it alleges Ownzones converted.

Plaintiff alleges that it had a right to posses and was entitled to possession of the $3.1 million that Defendants Goman and Ownzones placed in their personal bank account. 2AC, ¶ 75.

¶ 78 alleges that Plaintiff was the owner with the right to possess: (a) hard drives, disk storage, or other media that contains any audio-visual content of multi-episodic services or programs for Genesis’ 402TV channel; (b) intellectual property[2] including trademark material and registrations, copyrighted material and registrations, source codes for the user-interface developed for the 420TV channel; (c) logos for 402TV; and (d) the technology platform.

“Conversion is the wrongful exercise of dominion over the property of another.” (Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 543 [50 Cal. Rptr. 2d 810].) Proof of conversion requires a showing of ownership or right to possession of the property at the time of the conversion, the defendant's conversion by a wrongful act or disposition of property rights, and resulting damages. (Id. at pp. 543–544; Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066 [80 Cal. Rptr. 2d 704].) “Money can be the subject of an action for conversion if a specific sum capable of identification is involved.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452 [61 Cal. Rptr. 2d 707].)

Avidor v. Sutter's Place, Inc. (2013) 212 Cal.App.4th 1439, 1452 (bold emphasis and underlining added).

Here, Defendants’ argument is based upon the lack of an ownership interest, but ignores the alternative right to possession. Defendants do no address the allegation that Plaintiff has the right to possession of $3.1 million that Defendants placed in their personal bank account.

Moreover, ; 9.1 of the Strategic Alliance Agreement provides:

Ownership. Genesis shall own and retain all right, title and interest in and to the Media Business, Channel and Channel Programming, including any and all intellectual property rights therein (collectively the “Genesis Property”) provided, however, the copyrights in and to the Channel Programming and the trademarks in and to the Channel brands and logos will be owned jointly by Genesis and Nahai. To the extent applicable, Genesis and Nahai shall be deemed to be the “author” of all Channel Programming and all such Genesis Property will constitute “works made for hire” under the U.S. Copyright Act (17 U.S.C. ;; 101 et seq.) and any other applicable copyright law. . . . To the extent that Channel Programming does not constitute a work made for hire . . . OWNZONES hereby assigns to Genesis and Nahai all right, title and interest that OWNZONES may have or may hereafter acquire in all Channel Programming, including all intellectual property rights therein.

Nothing conditions this ownership upon full payment of the $4.1 million. Instead, the language appears to deem the foregoing to be the property of Ownzones, as author or assignee, upon creation of the works for hire.

Moreover, “an action in claim and delivery is a possessory action, and that one entitled to possession is entitled to maintain the action even though he is not vested with the legal title.” Feigin v. Kutchor (1951) 105 Cal.App.2d 744, 747 (bold emphasis added). Thus, for a claim and delivery action, ownership is not a required element.

Accordingly, Defendants have not demonstrated that they are entitled to judgment as to the fourth and fifth causes of action. The burden does not shift to Plaintiff to raise a triable issue of material fact.

The motion for summary adjudication as to Issue No. 3 re: the fourth cause of action and Issue No. 4 re: the fifth cause of action is DENIED.

5. Issue No. 5: “DEFENDANTS ARE ENTITLED TO SUMMARY ADJUDICATION ON PLAINTIFF’S SEVENTH CAUSE OF ACTION FOR DECLARATORY RELIEF BECAUSE IT IS WHOLLY DERIVATIVE OF EACH OF THE OTHER MERITLESS CAUSES OF ACTION.”

Defendants’ argument that the declaratory relief cause of action must fail because it is derivative of the other causes of action which fail is not persuasive for the reasons discussed above.

The motion for summary adjudication as to Issue No. 5 re: the seventh cause of action is DENIED.

Case Number: ****6021    Hearing Date: December 11, 2019    Dept: 48

MOTION TO COMPEL ANSWER AT DEPOSITION; REQUEST FOR SANCTIONS

MOVING PARTY: Plaintiff Genesis Media LLC and Cross-Defendant Howard Misle

RESPONDING PARTY(S): Third party deponent Peter Seltzer

PROOF OF SERVICE:

• Correct Address: Yes.
• 16/21 (CCP ; 1005(b)): OK. Served by mail on October 7, 2019.

• DENY motion to compel deposition and request for sanctions;
• GRANT Seltzer’s request for sanctions in the reduced amount of $1,875.

ANALYSIS

Motion to Compel Further Deposition Testimony

CCP ; 2025.480 provides:

1. If a deponent fails to answer any question or to produce any document, electronically stored information, or tangible thing under the deponent’s control that is specified in the deposition notice or a deposition subpoena, the party seeking discovery may move the court for an order compelling that answer or production.

   . . .

   CCP ; 2025.480 (bold emphasis and underlining added).

   Here, as pointed out by Seltzer, Plaintiff Genesis Media LLC and Cross-Defendant Howard Misle was not “the party seeking discovery” [CCP ; 2025.480(a)]. Rather the deposition was noticed by Defendants Ownzones Media Network, Inc. and Dan Goman. See Motion, Exh. A. As such, Plaintiff Genesis Media LLC and Cross-Defendant Howard Misle does not have standing to bring this motion to compel.

   The motion to compel the further deposition testimony of third party deponent Peter Seltzer and for sanctions is DENIED.

   Third party deponent Seltzer’s request for sanctions against Plaintiff and its counsel, Robert G. Klein, jointly and severally is GRANTED in the reduced amount of $1,875. Sanctions are to be paid to Selzter’s counsel wihin 10 days.

Case Number: ****6021    Hearing Date: November 04, 2019    Dept: 48

MOTION FOR LEAVE TO FILE FIRST AMENDED CROSS-COMPLAINT

MOVING PARTY: Defendant/Cross-Complainant Ownzones Media Network, LLC

RESPONDING PARTY(S): Plaintiff/Cross-Defendant Genesis Media, LLC AND Cross-Defendant Howard Misle

PROOF OF SERVICE:

• Correct Address: Yes.
• 16/21 (CCP ; 1005(b)): OK. Served by personal service on October 10, 2019.

• GRANT motion for leave to file first amended cross-complaint.

ANALYSIS

Motion for Leave to File First Amended Complaint

Defendant/Cross-Complainant Ownzones Media Network, LLC move for leave to file a first amended cross-complaint.

A red-lined version of the proposed 1AC reflecting changes was attached as Exhibit B to the motion.

The Declaration of Rebecca Lawlor Calkins sufficiently addressed the factors set forth in CRC Rule 3.1324(b).

Cross-Defendant’s argument the Cross-Complainant lacks standing to complain about Misle’s alleged embezzling of money from Genesis’ investors is not persuasive. Cross-Complainant would have standing to assert a fraudulent transfer claim, as well as a claim for fraud (by inducing Cross-Complainant to enter into the agreement even though Cross-Defendants knew they intended to embezzle funds that would otherwise be available to pay Cross-Complainant), and violation of B & P Code ; 17200.

Cross-Defendant’s remaining arguments on the merits may be tested by way of law and motion. Cross-Defendant has not demonstrated prejudice by way of the amendment. Any work done on the pending motion for summary adjudication can be utilized toward future motions for summary adjudication as to the amended cross-complaint.

The motion for leave to file a first amended cross-complaint is GRANTED. Cross-Complainant is ordered to file a stand-alone copy of the first amended cross-complaint today, and it is deemed to be served as of the date of this order.

Upon the filing of the first amended cross-complaint, the hearing on the motion for summary adjudication set to be heard on December 9, 2019 will be placed OFF-CALENDAR AS MOOT.