K360 WLA MANAGEMENT LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, ET AL. VS 11906 SAN VICENTE, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, ET AL.

Tentative Rulings

Case Number: *******7438 Hearing Date: February 7, 2023 Dept: 78

Superior Court of California

County of Los Angeles

Department 78

Plaintiffs’ Motion to Consolidate is GRANTED.

FACTUAL BACKGROUND

This is an actinon for breach of a commercial lease and fraud. The Complaint alleges as follows.

Non-parties Tracy Brennan and William Brennan (the “Brennans”) founded Kalologie Medspa (“Kalologie”). (Compl. 16.) The Brennans decided to franchise the concept and formed an entity to do so. (Ibid.)

The Kalologie locations in Studio City and Thousand Oaks were franchised. (Compl. 17.) The Studio City franchisee then opened two more Kalologie franchises in Brentwood and on Melrose Ave. (Ibid.) The lease agreements for each franchisee included a provision that allowed the franchisor to assume the lease in case of default. (Ibid.)

The Kalologie franchisee decided to exit the locations in Studio City, Brentwood, and Melrose; each of these locations was a tenant of an entity owned by Defendant Sina Akhtarzad (“Akhtarzad”). (Compl. 18.)

The landlord at the Brentwood Location was Defendant 11906 San Vicente, LLC (“11906 San Vicente”), which is managed by Akhtarzad. (Compl. 19.) Rent was overdue at the Brentwood location. (Ibid.) Despite the lease stating that the franchisor had the right to assume the lease upon default, Akhtarzad would not allow the franchisor to do so unless his nephew, Defendant Michael Starson (“Starson”) was granted ownership interest in the Brentwood, Studio City, and Melrose Locations, and unless Akhtarzad’s son-in-law, Defendant Saman Ghalili (“Ghalili”), was named medical director of same locations. (Compl. 19.) Additionally, Akhtarzad told the Brenanns that if they did not accede to his demands, he would evict all the Kalologie locations and rent them to a competitor. (Compl. 90.)

The Brennans, under duress, agreed to Akhtarzad’s terms. (Compl. 21.) Akhtarzad formed Plaintiff entities, which were owned by the Brennans, Starson, and Ghalili. (Ibid.) Additionally, Akhtarzad demanded that all the entities in which Starson and Ghalili had interest maintain their banking at Akhtarzad’s bank, and that Akhtarzad’s employees have unfettered access into Plaintiff entities’ funds. (Compl. 22.)

Following a lawsuit between a former franchisee and Akhtarzad, 11906 San Vicente and Akhtarzad agreed to pay the former franchisee $7,000 per month. (Compl. 24.) Akhtarzad funded these payments by raising the rent on the Brentwood location by $7,000 but failed to make any further payments to the former franchisee. (Ibid.)

Starson and Akhtarzad informed Plaintiffs that the Kalologie location on Melrose was damaged to the point of uninhabitability in the George Floyd protests. (Compl. 26.) That Kalologie location relocated to Robertson location at Akhtarzad’s behest. (Compl. 27.)

In or around 2019, Starson sold his interest in K360 Brentwood, K360 Studio City, and K360 Melrose to investors. (Compl. 28.) Although he received payments for his ownership interest, Starson continued to act as an owner in these entities. (Ibid.) Kalologie continued to expand, and Akhtarzad continued to demand that each new location opened in properties owned and controlled by him. (Compl. 29.)

Once COVID hit, Plaintiffs were forced to close their spas. (Compl. 31.) Plaintiffs could not pay rent and were not informed of Los Angeles County’s rent moratorium. (Ibid.) Instead, Plaintiffs applied for PPP loans, which were approved. (Ibid.) Starson and Akhtarzad, having control over Plaintiffs’ finances, directed all the PPP funds to pay rent, despite the moratorium. (Ibid.) Plaintiffs paid over $325,000 to Defendants during the pandemic though rent was not due and could be deferred. (Compl. 34.) Plaintiffs allege that PPP funds were comingled among Plaintiffs and used for different locations based on Starson and Akhtarzad’s whims. (Ibid.) Additionally, while the spa locations were shut down, Akhtarzad’s landlord entities performed construction on several of the locations such that Plaintiffs could not have used the space, even were there not a pandemic. (Compl. 35.) Plaintiffs continued to pay rent while the spaces were unusable. (Ibid.)

In or around May 2022, all parties began working toward a resolution regarding the various issues with the business. (Compl. 37.) Despite this, Akhtarzad permitted competing spas to advertise on the walls of two of Plaintiffs’ locations, then served three-day notices to pay rent to Plaintiffs without accounting for the rents paid during the pandemic. (Ibid.) Plaintiffs allege that this was a retaliatory action. (Ibid.)

Starson and Ghalili continually breached their fiduciary duties to Plaintiffs by putting Akhtarzad’s interests above Plaintiffs’ interests. (Compl. 30.)

PROCEDURAL HISTORY

On August 23, 2022, Plaintiffs filed the Complaint asserting six causes of action:

1. Breach of Written Contract;

2. Breach of Fiduciary Duty;

3. Fraud;

4. Violation of Bus. & Prof. Code 1720, et seq.;

5. Declaratory and Injunctive Relief; and,

6. Accounting

On August 29, 2022, Plaintiffs filed a Notice of Related Case.

On October 10, 2022, Plaintiffs filed the instant Motion to Consolidate.

On December 27, 2022, each Defendant filed a Demurrer to the Complaint. Those Demurrers will be heard between February 16, 2023, and March 21, 2023.

On January 25, 2023, Defendants filed an Opposition in Part to the Motion to Consolidate.

On January 31, 2023, Plaintiffs filed a Reply.

DISCUSSION

I. MOTION TO CONSOLIDATE

Plaintiff moves to Consolidate the instant action with the following unlawful detainer actions:

1. Lenton Properties, Inc. v. K360 WLA Management LLC, Case No. 22SMCV01577

2. La Cienega No. 57, LLC v. K360 Robertson Management, LLC, Case No. 22STCV31913

3. 11906 San Vicente, LLC v. K360 Brentwood Management, LLC, 22SMCV01573

4. Laurel Ventura Place, LLC v. K360 Studio City Management, LLC, Case No. 22BBCV00651

Code Civ. Proc., 1048, subd. (a) states, “[w]hen actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.” (Code Civ. Proc., 1048, subd. (a); see also Spector v. Superior Court (1961) 55 Cal.2d 839, 844 [Two actions that present essentially the same, or overlapping, issues should be consolidated and disposed of as a single proceeding].)

Consolidation, however, is not a matter of right; it rests solely within the sound discretion of the trial judge. (Fisher v. Nash Bldg. Co. (1952) 113 Cal.App.2d 397, 402.) Actions may be thoroughly “related” in the sense of having common questions of law or fact, and still not be “consolidated,” if the trial court, in the sound exercise of its discretion, chooses not to do so. (Askew v. Askew (1994) 22 Cal.App.4th 942, 964.) It is not abuse of discretion to deny motion for consolidation of actions where parties in each action are different or issues are different. (See Muller v. Robinson (1959) 174 Cal App 2d 511, 515.) On the other hand, actions may be consolidated in the discretion of the trial court whenever it can be done without prejudice to a substantial right. (Carpenson v. Najarian (1967) 254 Cal.App.2d 856, 862.)

In deciding whether to grant a motion to consolidate, the court should weigh whether the common issues predominate over the individual issues and whether any risks of jury confusion or prejudice to the parties outweighs the reduction in time and expense that would result from consolidation. (Todd-Stenberg v. Shield (1996) 48 Cal.App.4th 976, 978.)

Here, Plaintiffs argue that the instant action is inextricably intertwined with the Unlawful Detainer actions. Plaintiffs contend that the actions concern the same parties and events, and that Defendants’ Unlawful Detainer actions are all based on Plaintiffs’ failure to pay rent; Plaintiffs allege in this action that Defendant Landlords owe them money, and that any attempt to evict Plaintiffs would be fraudulent.

“When an unlawful detainer proceeding and an unlimited action concerning title to the property are simultaneously pending, the trial court in which the unlimited action is pending may stay the unlawful detainer action until the issue of title is resolved in the unlimited action, or it may consolidate the actions. [Citation.]” (Martin-Bragg v. Moore (2013) 219 Cal.App.4^th 367, 385.) If it does neither and instead tries the issue of title under the summary procedures that constrain unlawful detainer proceedings, the parties’ right to a full trial of the issue of title may be unfairly expedited and limited.” (Ibid.) If complex issues of title are tried in the unlawful detainer proceeding, the proceeding loses its summary character; defects in the plaintiff’s title are neither properly raised in this summary proceeding for possession, nor are they concluded by the judgment.” (Ibid.)

Plaintiffs contend that, in this action, they will show that Starson and Ghalili breached their fiduciary duties to Plaintiffs by placing their loyalty to Akhtarzad over Plaintiffs. Additionally, Plaintiffs contend that they will show Akhtarzad unduly influenced Plaintiffs to pay rent when none was due. Plaintiffs argue that Landlord Defendants’ basis for the unlawful detainer actions are all predicated on the issues that are to be adjudicated here.

Only one of the Landlord Defendants opposes Plaintiffs’ Motion to Consolidate: Laurel Ventura Place, LLC (“Laurel Ventura Place”) in Laurel Ventura Place, LLC v. K360 Studio City Management LLC, Case No. 22BBCV00651.

Laurel Ventura Place contends that consolidation would be improper for several reasons.

First, Laurel Ventura Place argues that the case Plaintiffs cite, Asuncion v. Superior Court (1980) 108 Cal.App.3d 141, is distinguishable from the instant action as the dispute in Asuncion centered on ownership disputes of the subject property, whereas here the only issue is possession, not title.

Although Laurel Ventura Place is correct in noting this distinction, the Court finds that this distinction is merely formalist, and that the purpose of the Asuncion holding; adjudicating complex issues of possession relating to allegations of fraud outside the summary procedures of unlawful detainer court; is on-point here. While it is true that Plaintiffs do not claim title to the Subject Properties, they do contend that their right to maintain possession of those properties is inextricably intertwined with the matters that will be adjudicated in this action, and that it would be needlessly complicated to litigate the two matters separately.

Next, Laurel Ventura Place differentiates the instant case from Asuncion in that Asuncion related to a residential lease, whereas the instant action relates to a commercial lease. Laurel Ventura Place does not explain how the nature of the lease was determinative in the Asuncion Court’s reasoning, and the Court does not find that distinction relevant.

Next, Laurel Ventura Place contends that there are no complex matters to be resolved regarding the lease, and that this is a simple matter regularly adjudicated in unlawful detainer court. Having read the Complaint, the Court finds that there are many complex issues regarding the breach of the lease and Defendants’ fiduciary duty to Plaintiffs that are controlling on the issue of possession. While Laurel Ventura Place might contest the validity of these allegations, the instant motion is not the proper place for those issues to be litigated.

Finally, Laurel Ventura Place contends that it will be severely prejudiced if it is deprived of the summary procedures of unlawful detainer court. However, as Plaintiffs note in their Reply, the Unlawful Detainer Court has already ordered Plaintiffs to pay all due rent, and to continue paying rent throughout the pendency of the action. The Court ordered that if “Defendant fails to pay [rent] for any future month by the 5^th of the month, Plaintiff will be entitled to an immediate ex parte order evicting Defendant from the premises.” (Kelly Decl. 2, Ex. E.)

As K360 Studio City is current on its rent, and as Laurel Ventura Place has access to immediate relief should K360 Studio City fail to pay rent, the Court finds that there is minimal prejudice to Laurel Ventura Place in consolidating this action with the UD action.

Accordingly, Plaintiffs’ Motion to Consolidate the instant action with case numbers 22MCV01577, 22STCV31913, 22SMCV01573, and 22BBCV00651 is GRANTED.

DATED: February 7, 2023

Hon. Robert S. Draper

Judge of the Superior Court