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This case was last updated from Los Angeles County Superior Courts on 01/11/2021 at 08:13:10 (UTC).

SPIDERWORX MEDIA LLC ET AL VS HARRIS E TULCHIN ET AL

Case Summary

On 09/24/2018 SPIDERWORX MEDIA LLC filed a Contract - Professional Negligence lawsuit against HARRIS E TULCHIN. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is JAMES C. CHALFANT. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****2874

  • Filing Date:

    09/24/2018

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Professional Negligence

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

JAMES C. CHALFANT

 

Party Details

Plaintiffs, Petitioners and Cross Defendants

SPIDERWORX MEDIA LLC

AN L.A. MINUTE LLC

NAZARENKO ALEX

ADAMS DANIEL

FLANDERS MICHAEL

Defendants, Respondents and Cross Plaintiffs

DOES 1-10

TULCHIN HARRIS E.

HARRIS TULCHIN & ASSOCIATES LTD

NAZARENKO ALEX

ADAMS DANIEL

FLANDERS MICHAEL

SPIDERWORX MEDIA LLC A CALIFORNIA LIMITED LIABILITY COMPANY

TULCHIN HARRIS

HARRIS TULCHIN & ASSOCIATES LTD.

Not Classified By Court

TEST PARTY FOR TRUST CONVERSION

Attorney/Law Firm Details

Defendant, Plaintiff and Cross Plaintiff Attorneys

RUSS LARRY CRAIG

FURMAN JOSHUA R.

FURMAN JORDANA R.

FURMAN JOSHUA REUBEN

FURMAN JOSHUA

TULCHIN HARRIS E. ESQ.

RUSS LARRY C. ESQ.

TULCHIN HARRIS E

Plaintiff, Petitioner and Cross Defendant Attorneys

FURMAN JOSHUA R.

FURMAN JOSHUA REUBEN

FURMAN JOSHUA

GALLARDO TOMMY QUINN

SOHAL VIKRAM

STARRE JONATHAN MARTIN

STARRE JONATHAN M. ESQ.

GALLARDO TOMMY Q. ESQ.

Defendant, Respondent and Cross Plaintiff Attorneys

LITWAK GLENN ESQ.

TULCHIN HARRIS ELIOT

RUSS LARRY C

RUSS LARRY CRAIG

LITWAK GLENN TOD ESQ.

LITWAK GLENN TOD

SAMANI DAVID D

SAMANI DAVID D. ESQ.

TULCHIN HARRIS E. ESQ.

RUSS LARRY C. ESQ.

Defendant and Respondent Attorney

LITWAK GLENN ESQ.

 

Court Documents

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 07/16/2020

7/16/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 07/16/2020

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 06/09/2020

6/9/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 06/09/2020

Request for Dismissal

6/17/2020: Request for Dismissal

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 04/15/2020

4/15/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 04/15/2020

DECLARATION OF DANIEL ADAMS RE: EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND OSC: PRELIMINARY INJUNCTION

9/24/2018: DECLARATION OF DANIEL ADAMS RE: EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND OSC: PRELIMINARY INJUNCTION

DECLARATION OF JOSHUA R. FURMAN RE: EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND OSC: PRELIMINARY INJUNCTION

9/24/2018: DECLARATION OF JOSHUA R. FURMAN RE: EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND OSC: PRELIMINARY INJUNCTION

Amended Complaint - SECOND AMENDED CROSS-COMPLAINT

11/26/2019: Amended Complaint - SECOND AMENDED CROSS-COMPLAINT

Opposition - OPPOSITION TO ALEX NAZARENKOS MOTION TO STRIKE FIRST AMENDED CROSS- COMPLAINT

10/22/2019: Opposition - OPPOSITION TO ALEX NAZARENKOS MOTION TO STRIKE FIRST AMENDED CROSS- COMPLAINT

Request for Judicial Notice

4/12/2019: Request for Judicial Notice

Notice - NOTICE OF CASE MANAGEMENT CONFERENCE

3/8/2019: Notice - NOTICE OF CASE MANAGEMENT CONFERENCE

Request for Judicial Notice

2/26/2019: Request for Judicial Notice

Demurrer - without Motion to Strike

2/26/2019: Demurrer - without Motion to Strike

Notice - Notice of Case Reassignment

2/14/2019: Notice - Notice of Case Reassignment

Declaration - Declaration of Paul Hazen

12/3/2018: Declaration - Declaration of Paul Hazen

134 More Documents Available

 

Docket Entries

  • 07/20/2021
  • Hearing07/20/2021 at 10:00 AM in Department 37 at 111 North Hill Street, Los Angeles, CA 90012; Jury Trial

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  • 07/13/2021
  • Hearing07/13/2021 at 08:30 AM in Department 37 at 111 North Hill Street, Los Angeles, CA 90012; Final Status Conference

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  • 09/15/2020
  • Docketat 10:00 AM in Department 37; Jury Trial - Not Held - Advanced and Continued - by Court

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  • 09/08/2020
  • Docketat 08:30 AM in Department 37; Final Status Conference - Not Held - Advanced and Continued - by Court

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  • 08/10/2020
  • DocketNotice of Ruling; Filed by Harris Tulchin & Associates, LTD. (Defendant)

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  • 08/05/2020
  • Docketat 11:07 AM in Department 37; Nunc Pro Tunc Order

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  • 08/05/2020
  • Docketat 08:30 AM in Department 37; Hearing on Motion to Deem Request for Admissions Admitted - Held

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  • 08/05/2020
  • DocketCertificate of Mailing for ((Nunc Pro Tunc Order) of 08/05/2020); Filed by Clerk

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  • 08/05/2020
  • DocketMinute Order ( (Nunc Pro Tunc Order)); Filed by Clerk

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  • 08/05/2020
  • DocketMinute Order ( (Hearing on Motion to Deem Request for Admissions Admitted)); Filed by Clerk

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160 More Docket Entries
  • 09/24/2018
  • DocketComplaint; Filed by An L.A. Minute, LLC (Plaintiff); Spiderworx Media, LLC (Plaintiff)

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  • 09/24/2018
  • DocketEx-Parte Application; Filed by Spiderworx Media, LLC (Plaintiff)

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  • 09/24/2018
  • DocketDeclaration; Filed by Spiderworx Media, LLC (Plaintiff)

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  • 09/24/2018
  • DocketDeclaration; Filed by Spiderworx Media, LLC (Plaintiff)

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  • 09/24/2018
  • DocketDeclaration; Filed by Spiderworx Media, LLC (Plaintiff)

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  • 09/24/2018
  • DocketDeclaration; Filed by Harris Tulchin & Associates, LTD. (Defendant); Harris Tulchin (Defendant)

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  • 09/24/2018
  • DocketOpposition Points & Authorities; Filed by Harris Tulchin & Associates, LTD. (Defendant); Harris Tulchin (Defendant)

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  • 09/24/2018
  • DocketOrder; Filed by Spiderworx Media, LLC (Plaintiff)

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  • 09/24/2018
  • DocketDECLARATION OF DANIEL ADAMS RE: EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND OSC: PRELIMINARY INJUNCTION

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  • 09/24/2018
  • DocketCOMPLAINT

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Tentative Rulings

Case Number: BC722874    Hearing Date: August 05, 2020    Dept: 37

HEARING DATE: August 5, 2020

CASE NUMBER: BC722874

CASE NAME: Spiderworx Media LLC v. Harris e. Tulchin, et al.

TRIAL DATE: July 20, 2021

MOTION: Motion to Deem Request for Admissions, Set One Admitted as to Michael Flanders

MOVING PARTIES: Defendant and Cross-Complainants, Harris Tulchin and Harris Tulchin & Associates, Ltd.

OPPOSING PARTY: Cross-Defendant, Michael Flanders

PROOF OF SERVICE: OK

OPPOSITION: None as of July 30, 2020

REPLY: No opposition filed

TENTATIVE: Tulchin Defendants’ Motion to Deem Request for Admissions Admitted is GRANTED. Request for Admissions, Set One is deemed ADMITTED as to Cross-Defendant, Michael Flanders. Tulchin Defendants’ request for sanctions is granted in the total amount of $300. Tulchin Defendants to give notice.

Background

The background for this case has been recited in prior tentative rulings.

Briefly, this case arises in connection with Defendants Harris E. Tulchin (“Tulchin”) and Harris Tulchin & Associates (“HTA”)’s alleged legal representation of Plaintiffs Spiderworx Media, LLC (“Spiderworx”); An L.A. Minute, LLC (“ALAM”); and Daniel Adams (“Adams”).  Plaintiffs allege that Defendants’ legal work included obtaining additional funding for the Film and that the need for a bridge or gap loan arose before the additional funding was available in the form of a loan from Pacific Mercantile Bank Loan (the “PMB Loan”).

In the Complaint, Plaintiffs allege three causes of action for: (1) legal malpractice, (2) breach of fiduciary duty; and (3) declaratory relief. 

Defendants have filed a Cross-Complaint alleging ten causes of action for: (1) intentional misrepresentation; (2) concealment; (3) breach of fiduciary duty; (4) tortious interference with contractual relations; (5) breach of contract; (6) breach of the implied covenant of good faith and fair dealing; (7) civil conspiracy; (8) accounting; (9) common count: money had and received; and (10) violation of Business and Professions Code, §§ 17200, et seq. (the Unfair Competition Law, “UCL”).  Defendants assert the cross-claims against Cross-Defendants Michael Flanders (“Flanders”), Nazarenko, Adams, Spiderworx, and ALAM. 

Tulchin and HTA filed a First Amended Cross-Complaint (“FACC”) on May 13, 2019. The FACC added causes of action for conversion and fraudulent transfer in violation of Civil Code §§ 3429, et seq. against all cross-defendants.  

Tulchin and HTA (together, “Tulchin Defendants”) now moves to deem Request for Admissions, Set One admitted as to cross-defendant Michael Flanders. (“Flanders”)

The Tulchin Defendant served Request for Admissions, Set One on Flanders on December 17, 2019. (Declaration of Harris E. Tulchin (“Tulchin Decl.”), ¶ 2, Exhibit A.) Accordingly, Flanders’ deadline to serve responses was January 16, 2020. (Tulchin Decl. ¶ 3.) Flanders has not served responses to these requests as of the filing of the instant motion. (Tulchin Decl. ¶¶ 3-4.)

Analysis

I. Discussion

“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).)

“If a party to whom requests for admission are directed fails to serve a timely response . . . . (b) The requesting party may move for an order that the genuineness of any documents and the truth of any matters specified in the requests be deemed admitted, as well as for a monetary sanction under Chapter 7 (commencing with Section 2023.010).”  (Code Civ. Proc., § 2033.280.) If the requesting party moves for an order to deem its requests for admissions admitted, the court “shall make this order, unless it finds that the party to whom the requests for admissions have been directed has served, before the hearing on the motion, a proposed response to the requests for admission that is in substantial compliance with section 2033.220.” (Code Civ. Proc., § 2033.280 (c).)

Tulchin Defendants contend that an order deeming Request for Admissions, Set One admitted against Flanders is warranted because Flanders failed to serve responses by January 16, 2020 and also failed to ask for any extension of time in which to respond. (Motion, 3-4.) The Tulchin Defendants’ request for admissions asks Flanders to admit various facts surrounding his alleged involvement in Spiderworx and ALAM’s film financing projects described above. (see Tulchin Decl., Exhibit A.)

Based on the above, the Tulchin Defendants have demonstrated that Request for Admissions, Set One was properly served on Flanders and have also demonstrated that Flanders has failed to serve responses to these requests to date. Tulchin Defendants have demonstrated good cause for an ordering deeming Request for Admissions, Set One admitted as to Flanders.

II. Request for 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).)

Tulchin attests that his office requests a total of $1,355 in monetary sanctions against Flanders in connection with the instant motion. (Tulchin Decl. ¶ 7.) Specifically, Tulchin attests that this amount compromises of $60 in motion filing fees, 0.2 hours by attorney David D. Samani to edit and finalize the motion, and an additional 3.5 hours to prepare a reply brief and attend the hearing. (Tulchin Decl. ¶¶ 5-6.) According to Tulchin, Samani’s billing rate is $350 per hour. Even though no reply brief was necessary, the court grants Tulchin’s request for sanctions based on the time to prepare the motion and attend the hearing, in the reduced amount of $300.

III. Conclusion

Tulchin Defendants’ motion to deem Request for Admissions, Set One Admitted as to Michael Flanders is granted. Request for Admissions, Set One is deemed admitted as to Michael Flanders. Tulchin Defendants’ request for sanctions is granted in the amount of $300.

Tulchin Defendants are to give notice.

Case Number: BC722874    Hearing Date: March 11, 2020    Dept: 37

HEARING DATE: March 11, 2020

CASE NUMBER: BC722874

CASE NAME: Spiderworx Media, LLC, et al. v. Harris E. Tulchin, an individual, et al.

TRIAL DATE: None

PROOF OF SERVICE: OK

MOTION: Defendant’s Demurrer to the Second Amended Cross-Complaint

MOVING PARTY: Cross-Defendants, Spiderworx Media, LLC and Daniel Adams

OPPOSING PARTY: Cross-Complainants, Harris Tulchin, et al.

OPPOSITION: February 27, 2020

REPLY: March 3, 2020

TENTATIVE: Spiderworx Defendants’ demurrer to the sixth cause of action is sustained. The demurrer is otherwise overruled. Spiderworx Defendants are to provide notice and cross-complainants are granted leave to amend within 20 days of this date.

MOTION: Defendant’s Demurrer to the Second Amended Cross-Complaint

MOVING PARTY: Cross-Defendant, Alex Nazarenko

OPPOSING PARTY: Cross-Complainants, Harris Tulchin, et al.

OPPOSITION: February 27, 2020

REPLY: March 4, 2020

TENTATIVE: Nazarenko’s demurrer to the sixth cause of action is sustained. Spiderworx Defendants are to provide notice and cross-complainants are granted leave to amend within 20 days of this date.

BACKGROUND

This case arises in connection with Defendants Harris E. Tulchin (“Tulchin”) and Harris Tulchin & Associates (“HTA”)’s alleged legal representation of Plaintiffs Spiderworx Media, LLC (“Spiderworx”); An L.A. Minute, LLC (“ALAM”); and Daniel Adams (“Adams”). Plaintiffs allege that Defendants’ legal work included obtaining additional funding for the Film and that the need for a bridge or gap loan arose before the additional funding was available in the form of a loan from Pacific Mercantile Bank Loan (the “PMB Loan”). According to Plaintiffs, a bridge loan funder was located, but Tulchin offered to provide $885,000 in funding for the gap loan instead and convinced Plaintiffs to abandon other bridge financing in favor of his own deal. Tulchin allegedly demanded a security interest in the Film, the elements of the Film, and the proceeds of the Film; interest on the loan; a pledge of membership interests in ALAM; producer credit; legal services credit; and $1,000 for costs of providing the funding.

Tulchin allegedly acted as Spiderworx’ lawyer in preparing the loan documents and charged Plaintiffs $10,000 in legal fees for doing so. Tulchin allegedly also demanded power of attorney for the loan. According to Plaintiffs, Tulchin did not advise them that the loan created a conflict of interest, advise them that they had a right to seek independent legal counsel, or provide them with adequate time to seek independent legal counsel.

Plaintiffs allege that Tulchin subsequently made it impossible for Plaintiffs to obtain a commitment from the new lender because Tulchin’s loan allegedly provided him with irrevocable first position on the collateral and because he refused to enter into a subordination agreement with any lender. Plaintiffs further allege that Tulchin’s terms were predatory and worse than the terms of the bridge loan that he had convinced Plaintiffs to abandon. According to Plaintiffs, they were able to obtain private funding to complete production in May 2017 based on Tulchin’s agreement to enter into a subordination agreement with a private financier, Cross-Defendant Alex Nazarenko (“Nazarenko”). Tulchin, however, allegedly refused to sign the subordination agreement he had prepared after the private financier was engaged and promised first position on the Film.

Plaintiffs further allege that Tulchin has breached fiduciary duties by sending Plaintiffs’ counsel a notice of disposition of collateral on September 13, 2018, indicating his intent to proceed with a sale of the Film; refusing to execute the proper union agreements for the Film; negotiating side deals to his favor over elements of the Film; making misrepresentations that prevented the Film’s distributor from preparing promotional materials in time for the Cannes Film Festival; making misrepresentations to the Film’s distributor cancelling the U.S. theatrical release to his benefit but the detriment of Plaintiffs and the other investors; and attempting to negotiate a side deal with the distributor to allow him to receive all the gross income from the Film.

In the Complaint, Plaintiffs allege three causes of action for: (1) legal malpractice, (2) breach of fiduciary duty; and (3) declaratory relief.

Defendants have filed a Cross-Complaint alleging ten causes of action for: (1) intentional misrepresentation; (2) concealment; (3) breach of fiduciary duty; (4) tortious interference with contractual relations; (5) breach of contract; (6) breach of the implied covenant of good faith and fair dealing; (7) civil conspiracy; (8) accounting; (9) common count: money had and received; and (10) violation of Business and Professions Code, §§ 17200, et seq. (the Unfair Competition Law, “UCL”). Defendants assert the cross-claims against Cross-Defendants Michael Flanders (“Flanders”), Nazarenko, Adams, Spiderworx, and ALAM. Defendants assert the first through third and seventh through tenth causes of action against all Cross-Defendants; the fourth cause of action against Nazarenko; and the fifth and sixth causes of action against Spiderworx, ALAM, Adams, and Flanders.

According to Defendants, Tulchin was a long-term friend of Adams who agreed to provide his entertainment contacts to Spiderworx and ALAM and their managers and members to support the film. Defendants allege that Tulchin was fraudulently induced to provide a bridge loan on terms comparable to an offer made by BondIt Media Capital (“BondIt”) after BondIt requested information from Cross-Defendants, including information concerning the status of the closing of the principal loan and the financial status of ALAM and Spiderworx.

On April 23, 2019, the court sustained cross-defendants’ demurrers to the third cause of action on the cross-complaint and to the fifth and sixth causes of action of the cross-complaint as to cross-defendant Adams.

Tulchin and HTA filed a First Amended Cross-Complaint (“FACC”) on May 13, 2019. The FACC added causes of action for conversion and fraudulent transfer in violation of Civil Code §§ 3429, et seq. against all cross-defendants.

On November 5, 2019 the court sustained cross-defendants’ demurrers to the fourth, fifth, sixth, seventh and eighth causes of action of the FACC. The cross-defendants’ demurrers were otherwise overruled, as well as cross-defendants’ motions to strike. Cross-complainants were granted leave to amend as to the breach of contract cause of action

Adams demurrers to the fourth and fifth causes of action of the Second Amended Cross-Complaint (“SACC”) on the grounds that each fail to allege facts sufficient to state a cause of action against him. Spiderworx, ALAM and Adams (“Spiderworx Defendants”) additionally all demurrer to the sixth cause of action of the SACC on the grounds that it fails to allege facts sufficient to state a cause of action against the Spiderworx Defendants. Cross-defendant Alex Nazarenko (“Nazarenko”) also demurrers to the sixth cause of action of the SACC on the grounds that it fails to state facts sufficient to allege a cause of action against him. Cross-complainants oppose the demurrers.

DEMURRER TO THE SECOND AMENDED COMPLAINT

  1. Meet and Confer Efforts

Spiderworx Defendants submit the declaration of their attorney, Joshua R. Furman (“Furman”) to demonstrate that they have met their statutory meet and confer obligations pursuant to Code of Civil Procedure, section 430.41 prior to bringing the instant demurrer. Furman attests that on December 10, 2019, he wrote to Tulchin’s counsel requesting to meet and confer and identifying the deficiencies the Spideworx Defendants’ demurrer sought to address. (Furman Decl. ¶ 2.) Furman further attests that on December 12, 2019, Tulchin’s counsel responded by email with “extensive discussions of poimts and authorities explaining that Tulchin believed the SACC to be sufficiently alleged. (Id.). Furman further alleges that on December 13, 2019, he responded to Tulchin’s December 12, 2019 meet and confer email and indicating that he was open to further meet and confer. (Id.) Further attests that he did not receive a further response after December 13, 2019.

Accordingly, the Spiderworx Defendants have demonstrated that they have met their statutory meet and confer obligations pursuant to Code of Civil Procedure, section 430.41.

Further, Nazarenko submits the declaration of his counsel, Jonathan M. Starre (“Starre”) to demonstrate that he has fulfilled his meet and confer obligations prior to bringing the instant demurrer. Starre attests that on June 12, 2019, he sent cross-complainant’s counsel, Diana Sanders, a meet and confer letter outlining Nazarenko’s objections to the FACC. (Starre Decl. ¶ 3.) Starre attests that Sanders replied by email on July 11, 2019 and that the parties further met and conferred by telephone on July 11, 2019. (Id.) As such, Nazarenko has demonstrated that he has sufficiently met and conferred prior to bringing the instant demurrer.

  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 (Mahan), 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. Fourth Cause of Action: Breach of Contract against Adams

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

Spiderworx Defendants contend that the fourth cause of action remains insufficiently alleged as to Adams because Adams is not a party to the loan agreement and the allegations regarding the alleged inducement agreement fails to allege that Adams receive consideration for his signature on same. (Motion, 4-6.) Spiderworx Defendants cite to various cases standing for the principle that the parol evidence rule generally prohibits extrinsic evidence regarding a contract. (see, eg, Casa Herrera v. Beydoun (2004) 32 Cal.4th 336, 345(Beydoun).)

In opposition, cross-complainants contend that the SACC sufficiently alleges breach of contract against Adams because the SACC’s allegations regarding the inducement agreement are sufficient in that they allege Adams signed the inducement agreement and benefitted from doing so. (Opposition, 7-10.) Cross-complainants point to the SACC at paragraphs 25 and 86 in support of their contention that the SACC alleges benefit to Adams as a result of his signature on the inducement agreement. (Id.) Cross-complainants further contend that all case law that Spiderworx Defendants cited for the proposition that extrinsic evidence cannot be admitted ignores exceptions to the parol evidence rule, which provide that parol evidence may be introduced if it supports a meaning to which the written contract terms are “reasonably susceptible.” (Opposition, 9.)

Here, the SACC alleges that Adams “had a lot to gain personally on the mere financing, production and completion of the Picture.” (SACC ¶ 25.) Adams was to be paid for the Picture, but would only be paid “if the Picture was financed and began principal photography.” (Id.) Further, the SACC alleges that Adams breached the inducement agreement by “failing to provide an actual valid letter of credit and other material financial information,” and that cross-defendants were informed that the Loan would likely not be approved because it lacked this documentation. (SACC ¶ 33.) Moreover, the SACC alleges that the Adams had to gain from the Loan because the Loan would ensure that the “principal actors would travel and principal photography of the Picture would commence on time.” (SACC ¶ 86.) Further, according to the SACC, it was in Adams’ interest to sign the Inducement Agreement before HTA provided the Loan. (Id.)

In reply, Spiderworx defendants reiterate their contention that the SACC is a sham pleading in that cross-complainants fail to explain why the FACC pleads that a letter of credit was provided while the SACC alleges pleads that no letter of credit was provided. (Reply, 1-2.) The court disagrees with this interpretation. As discussed above, the SACC pleads that no valid letter of credit was provided, not that no letter at all was provided.

Given the foregoing, the court agrees with cross-complainants. By way of example, Beydoun held that while the parol evidence rule generally prohibits the introduction of any extrinsic evidence, it does not prohibit introduction of extrinsic evidence “ “ to explain the meaning of a written contract…[if] the meaning urged is one to which the written contract terms are reasonably susceptible.”” (Beydoun, supra, 32 Cal.4th at 343 [quoting BMW of North America, Inc. v. New Motor Vehicle Bd. (1984) 162 Cal.App.3d 980, 990.].) Further, as cross-complainants contend, the SACC now alleges facts regarding how Adams personally benefitted or stood to benefit from signing the inducement agreement because the SACC now alleges that Adams was to be compensated for the Picture, but only if the Picture was financed through the Loan, which was contingent on the inducement agreement. Although Spiderworx Defendants contend generally that the SACC is still deficient because it fails to plead a personal benefit to Adams from signing the inducement agreement, this contention fails because the SACC on its face now pleads a benefit. Further, the court specifically granted cross-complainants leave to amend the breach of contract cause of action in its November 5, 2019 ruling and, as such, the additional factual allegations are appropriate.

Accordingly, Spiderworx Defendants’ demurrer to the fourth cause of action is overruled.

  1. Fifth Cause of Action: Breach of Implied Covenant of Good Faith and Fair Dealing against Adams

In every contract there is an implied covenant of good faith and fair dealing. (Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th 299, 314.) The covenant of good faith and fair dealing imposes a general duty upon each contracting party “to perform faithfully and not to deprive the other party of the benefits of the contract.” (Floystrup v. City of Berkeley Rent Stabilization Bd. (1990) 219 Cal.App.3d 1309, 1318.)

A breach of the implied covenant of good faith and fair dealing requires something more than breach of the contractual duty itself. (Careau & Co v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394 (Careau).) “Thus, allegations which assert such a claim must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Id. at 1395.)

Spiderworx Defendants contend that the fifth cause of action remains insufficiently pled for the same reasons it was found insufficient in each of the previous demurrers. (Motion, 6-7.) The opposition does not directly address this argument.

Here, the SACC alleges that the Spiderworx Defendants breached the implied covenant of good faith and fair dealing by engaging in various allegedly intentional actions, including: (1) “intentionally misrepresent[ing] that Spiderworx had sufficient funds to support the production of the Picture,” (2) failing to disclose that the bank statements supplied in support of the Loan were “fraudulent.” (see SACC ¶ 93(a)-(f).)

Accordingly, liberally construing the allegations of the SACC in favor of cross-complainants, the court finds that the fifth cause of action is sufficiently alleged. As discussed above, the court previously found that the fourth cause of action was now sufficiently alleged as against Adams because the SACC now includes factual allegations regarding how Adams allegedly benefitted from the inducement agreement. Further, as discussed above the SACC alleges that Spiderworx Defendants engaged in “conscious and deliberate act[s]” to frustrate the purpose the loan agreements between the parties. This is sufficent to allege a cause of action for breach of the implied covenant of good faith and fair dealing.

As such, Spiderworx Defendants’ demurrer is overruled to the fifth cause of action.

  1. Sixth Cause of Action: Conversion

“ ‘ To establish a conversion, plaintiff must establish an actual interference with his ownership or right of possession…when plaintiff neither has title to the property alleged to have been converted, nor possession thereof, he cannot maintain an action for conversion.’ “ (Moore v. Regents of the Univ. of Cal. (1990) 51 Cal.3d 120, 136, internal citations omitted.) “Neither legal title nor absolute ownership of the property is necessary…a party need only allege it is ‘entitled to immediate possession at the time of conversion…however, a mere contractual right of payment, without more, will not suffice.” (Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, 50.)

The court previously sustained Spiderworx Defendants’ demurrer to the sixth cause of action in the FACC because the sixth cause of action did not allege a conversion of tangible property but instead based the conversion cause of action on conversion of tax credits, which are intangible. (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 238.) Spiderworx Defendants now contend that the sixth cause of action of the SACC fails for the same reasons, namely that (1) conversion only applies to tangible property, and (2) the SACC does not allege that Tulchin had a current possessory interest. (Motion, 7-10.)

Similarly, Nazarenko asserts that the sixth cause of action for conversion is insufficiently pled because it is based on a generalized claim for conversion of money, which fails as a matter of law. (Nazarenko Motion, 10-13.) Nazarenko relies in part on PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384 (PCO) for this proposition.

In opposition, cross-complainants allege that the sixth cause of action is properly alleged and rely on Fremont Indemnity Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97 for the proposition that conversion can be applied to intangible items of property so long as they are definitive and specific. (Opposition, 13-16.) Fremont held that “the misappropriation of a net operating loss without compensation” is comparable to misappropriation of tangible personal property for purposes of a demurrer to a conversion cause of action, so long as the net operating loss was specifically alleged. (Id. at 125-126.)

However, in PCO, the court of appeal held that plaintiffs’ conversion claim fails because plaintiffs failed to identify a “definite sum” of money that was allegedly converted. (Id. at 385.) The PCO court went on to hold that “money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment.” (Id. at 396.)

Given the foregoing, the court finds that the sixth cause of action for conversion remains insufficiently pled as to all cross-defendants. Although cross-complainants allege at paragraph 42-43 of the SACC a process by which the state of Georgia purports to calculate film tax credits, it is unclear from the SACC, read as a whole, which state or states the cross-complainants allegedly have present possessory tax credits in. By way of example, the SACC at paragraph 37 makes reference to “present and prior grant of the film tax credits...and…financing statements filed in Georgia, the District of Columbia, New York, and California.” The SACC does not include other factual allegations which specify how tax credits in these additional states are calculated, or whether cross-complainants allege that they possess tax credits in all of these additional states. Accordingly, the SACC is more factually similar to PCO in this instance, which held that a cause of actual based on conversion of money is insufficient if the complaint fails to identify a “definite sum” of money.

Accordingly, the cross-defendants’ demurrer to the sixth cause of action is sustained.

Conclusion

Spiderworx Defendants’ demurrer to the sixth cause of action is sustained, without leave to amend. The demurrer is otherwise overruled. Spiderworx Defendants are to provide notice.

Nazarenko’s demurrer to the sixth cause of action is sustained. Spiderworx Defendants are to provide notice.

Case Number: BC722874    Hearing Date: November 05, 2019    Dept: 37

HEARING DATE: November 5, 2019

CASE NUMBER: BC722874

CASE NAME: Spiderworx Media, LLC et al. v. Harris E. Tulchin, et al.

MOVING PARTY: (1) Cross-Defendants Spiderworx Media, LLC, An L.A. Minute, LLC, and Daniel Adams Bhatia and (2) Cross-Defendant Alex Nazarenko

OPPOSING PARTY: Cross-Complainants Harris Tulchin and Harris Tulchin & Associates, LTD

TRIAL DATE: Not yet scheduled

PROOF OF SERVICE: (1) OK by mail on July 17, 2019 and (2) OK by electronic service on July 17, 2019 (assuming electronic service agreement by parties).

PROCEEDING: Demurrer to and motion to strike the first amended cross-complainant by Nazarenko and Demurrer by Spiderworx Media, LLC, An L.A. Minute, LLC, and Daniel Adams Bhatia and joinder in motion to strike.

OPPOSITION: Timely filed on October 22, 2019.

REPLY: Timely filed on October 29, 2019.

RECOMMENDATION: The Court (1) OVERRULES the demurrer to the third, ninth, and eleventh causes of action; and (2) SUSTAINS the demurrers to the fourth, fifth, sixth, seventh and eighth causes of action. The Court DENIES the motion to strike the sixth and seventh causes of action and the remaining requests to strike punitive damages and attorney fees.

Background

This case arises in connection with Defendants Harris E. Tulchin (“Tulchin”) and Harris Tulchin

& Associates’ (“HTA”) alleged legal malpractice in connection with their representation of Plaintiffs Spiderworx Media, LLC (“Spiderworx”); An L.A. Minute, LLC (“ALAM”); and Daniel Adams (“Adams”). Plaintiffs allege that Defendants’ legal work included obtaining additional funding for the Film and that the need for a bridge or gap loan arose before the additional funding was available in the form of a loan from Pacific Mercantile Bank Loan (the “PMB Loan”). According to Plaintiffs, a bridge loan funder was located, but Tulchin offered to provide $885,000 in funding for the gap loan instead and convinced Plaintiffs to abandon other bridge financing in favor of his own deal. Tulchin allegedly demanded a security interest in the Film, the elements of the Film, and the proceeds of the Film; interest on the loan; a pledge of membership interests in ALAM; producer credit; legal services credit; and $1,000 for costs of providing the funding.

Tulchin allegedly acted as Spiderworx’ lawyer in preparing the loan documents and charged Plaintiffs $10,000 in legal fees for doing so. Tulchin allegedly also demanded power of attorney for the loan. According to Plaintiffs, Tulchin did not advise them that the loan created a conflict of interest or advise them that they had a right to seek independent legal counsel or provide them with adequate time to seek independent legal counsel.

Plaintiffs allege that Tulchin subsequently made it impossible for Plaintiffs to obtain a commitment from the new lender because Tulchin’s loan allegedly provided him with irrevocable first position on the collateral and because he refused to enter into a subordination agreement with any lender. Plaintiffs further allege that Tulchin’s terms were predatory and worse than the terms of the bridge loan that he had convinced Plaintiffs to abandon. According to Plaintiffs, they were able to obtain private funding to complete production in May 2017 based on Tulchin’s agreement to enter into a subordination agreement with a private financier, Cross- Defendant Alex Nazarenko (“Nazarenko”). Tulchin, however, allegedly refused to sign the subordination agreement he had prepared after the private financier was engaged and promised first position on the Film.

Plaintiffs further allege that Tulchin has breached fiduciary duties by sending Plaintiffs’ counsel a notice of disposition of collateral on September 13, 2018, indicating his intent to proceed with a sale of the Film; refusing to execute the proper union agreements for the Film; negotiating side deals to his favor over elements of the Film; making misrepresentations that prevented the Film’s distributor from preparing promotional materials in time for the Cannes Film Festival; making misrepresentations to the Film’s distributor cancelling the U.S. theatrical release to his benefit but the detriment of Plaintiffs and the other investors; and attempting to negotiate a side deal with the distributor to allow him to receive all the gross income from the Film.

In the Complaint, Plaintiffs allege three causes of action for: (1) legal malpractice, (2) breach of fiduciary duty; and (3) declaratory relief.

Cross-Complainants filed their initial Cross-Complaint alleging ten causes of action for: (1) intentional misrepresentation; (2) concealment; (3) breach of fiduciary duty; (4) tortious interference with contractual relations; (5) breach of contract; (6) breach of the implied covenant of good faith and fair dealing; (7) civil conspiracy; (8) accounting; (9) common count: money had and received; and (10) violation of Business and Professions Code, §§ 17200, et seq. (the Unfair Competition Law, “UCL”). Cross-Complainants assert the cross-claims against Cross-Defendants Michael Flanders (“Flanders”), Nazarenko, Adams, Spiderworx, and ALAM. Defendants assert the first through third and seventh through tenth causes of action against all Cross-Defendants; the fourth cause of action against Nazarenko; and the fifth and sixth causes of action against Spiderworx, ALAM, Adams, and Flanders.

According to Cross-Complainants’ initial Cross-Complaint, Tulchin was a long-term friend of Adams who agreed to provide his entertainment contacts to Spiderworx and ALAM and their managers and members to support the film. Cross-Complainants allege that Tulchin was fraudulently induced to provide a bridge loan on terms comparable to an offer made by BondIt Media Capital (“BondIt”) after BondIt requested information from Cross-Defendants, including information concerning the status of the closing of the principal loan and the financial status of ALAM and Spiderworx.

On April 23, 2019, the Court heard Spiderworx, ALAM, and Adams’ demurrer to the initial Cross-Complaint. The Court sustained the demurrers to the third cause of action (breach of fiduciary duty) in its entirety and the fifth (breach of contract) and sixth (breach of the implied covenant of good faith and fair dealing) causes of action against Adams with 20 days leave to amend. The Court overruled the demurrers as to the following causes of action: first – intentional misrepresentation; second – concealment; fifth – breach of contract as to Spiderworx and ALAM; seventh – civil conspiracy; eighth – accounting; and tenth violation of Business and Professions Code, §§ 17200, et seq. (the “UCL”).

On May 13, 2019, Tulchin and HTA filed the operative First Amended Cross-Complaint (“FACC”) alleging 11 causes of action for: (1) intentional misrepresentation; (2) concealment; (3) tortious interference with contractual relations; (4) breach of contract; (5) breach of the implied covenant of good faith and fair dealing; (6) conversion; (7) fraudulent transfer in violation of Civil Code, §§ 3429 et seq.; (8) civil conspiracy; (9) accounting; (10) common count: money had and received; and (11) violation of Business and Professions Code, §§ 17200, et seq. (the “UCL”). Cross-Complainants assert the cross-claims against Cross-Defendants Flanders, Nazarenko, Adams, Spiderworx, and ALAM. Defendants assert the first, second, sixth through eleventh causes of action against all Cross-Defendants; the third cause of action against Nazarenko; and the fourth, fifth and tenth causes of action against Spiderworx, ALAM, Adams, and Flanders.

Notably, the sixth and seventh causes of action are new.

Now, (1) Nazarenko and (2) Spiderworx, ALAM, and Adams filed demurrers.

Specifically, Nazarenko demurs to the following causes of action: (3) tortious interference with contractual relations; (6) conversion; (8) civil conspiracy; (9) accounting; and (11) violation of Business and Professions Code, §§ 17200, et seq. (the “UCL”).

Specifically, Spiderworx, ALAM, and Adams demurs to the following causes of action: (4) breach of contract against Adams; (5) breach of the implied covenant of good faith and fair dealing against Adams; (6) conversion against any of Spiderworx, ALAM, and Adams; and (7) fraudulent transfer in violation of Civil Code, §§ 3429 et seq. against any of Spiderworx, ALAM, and Adams

Nazarenko also filed a motion to strike the prayer for punitive damages and attorney fees and the added sixth and seventh causes of action. Spiderworx, ALAM, and Adams filed a joinder to that motion.

Cross-Complainants oppose.

Meet and Confer

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., § 430.41, subd. (a)(2).)

A similar meet and confer process and declaration is required for motions to strike. (Code Civ. Proc., § 435.5.)

The demurring parties have filed a declaration detailing sufficient meet and confer efforts.

Accordingly, the Court addresses the merits.

Request for Judicial Notice

Plaintiffs request the court take judicial notice (“RJN”) of two documents: (1) the November 10, 2016 Bridge Loan Facility for the Film and (2) the November 14, 2016 Security Agreement and Mortgage of Copyright. These two documents were referenced in both the Complaint and FACC. (Compl. ¶¶ 12-13, 20; FACC ¶¶ 26-27.)

Cross-Complainants request the court to take judicial notice of the November 15, 2016 Promissory Note for the Film. This document was referenced in the FACC. (FACC ¶ 28.)

“Judicial notice may not be taken of any matter unless authorized or required by law.” (Evid. Code, § 450.) Evidence Code section 452, subdivision (h), authorizes the court to take judicial notice of facts “that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.”

The court “may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language. . . . From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265, disapproved on other grounds by Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 939.)

Regarding the documents for which the Court grants judicial notice, the court is not mandated to accept the truth of its their contents or the parties’ interpretation of those contents. (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.) The existence and legal effect of these documents are judicially noticeable; reasonably disputable assertions of fact contained therein are not. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 754.)

The unopposed requests for judicial notice is GRANTED. The existence and legal effect of these documents are judicially noticeable; reasonably disputable assertions of fact contained therein are not. (Evid. Code, § 452, subds. (d) and (h).)

Legal Standard

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.)

On demurrer, a court has an independent duty to “determine whether or not the … complaint alleges facts sufficient to state a cause of action under any legal theory.” (Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 734 (Das).) 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 (Doe).) “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 (Rannard).) 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.)

Analysis

Demurrer by Nazarenko

 

A. Third cause of action – tortious interference with contractual relations (against Nazarenko only)

As a preliminary matter, Nazarenko argues that Cross-Complainants’ third cause of action is vague and uncertain because it is unclear if it intentional interference or negligent interference with contractual relations. However, the FACC clearly asserts “intentional interference with contractual relations.” (FACC ¶ 76.)

To prevail on a claim for interference with contract, a plaintiff must establish: “(1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Popescu v. Apple Inc. (2016) 1 Cal.App.5th 39, 51.) “It is not a requirement that ‘the defendant’s conduct be wrongful apart from the interference with the contract itself.’ Furthermore, a plaintiff need not establish that the primary purpose of the defendant’s actions was to disrupt the contract. The tort is shown even where ‘the actor does not act for the purpose of interfering with the contract or desire it but knows that the interference is certain or substantially certain to occur as a result of his [or her] action.’ [Citation.]” (Ibid.)

Nazarenko argues that the Cross-Complainants allege in the FACC that Nazarenko induced the borrowers to repudiate the Loan Agreements (FACC ¶ 72), and that conduct is insufficient to show “actual breach or disruption” (fourth element) because the borrowers remained free to make their own decisions. Additionally, Nazarenko argues that Cross-Complainants do not allege injury other than breach of contract (FACC ¶ 75), so his claim must fail (fifth element).

Nazarenko only disputes whether Cross-Complainants’ allegations satisfy the fourth and fifth elements. Therefore, the Court focuses its analysis only on those elements, i.e., there are sufficient allegations to allege that there was a valid contract (the Loan Agreements between Spiderworx and ALAM with HTA) that Nazarenko knew about and intended to and interfered with by inducing Plaintiffs to repudiate the Loan Agreements.

Regarding the fourth element, the Court disagrees with Nazarenko. Nazarenko presented Plaintiffs with his own agreement, in which Plaintiffs agreed to subordinate HTA’s security interest and furnish Nazarenko with a first priority security interest. (FACC ¶¶ 34-35.) This act specifically breached terms of the Loan Agreement and although Plaintiffs were free to decide to not sign the Nazarenko Agreement despite Nazarenko’s conduct and thus risk lose the financing of the Film, it is sufficiently alleged that Plaintiffs did so based on Nazarenko’s conduct, which caused the breach of the Loan Agreements. Whether this actually occurred for these reasons is a factual determination not the subject of a demurrer.

Regarding the fifth element, the parties focus their dispute on General Commercial Packaging, Inc. v. TPS Package Engineering, Inc. (9th Cir. 1997) 126 F.3d 1131 (General Commercial). Nazarenko that this case requires some alleged injury not compensated by contract remedies. However, Cross-Complainants successfully to distinguish that case, which involved the parties who were in privity of contract and that contract contained a liquidated damages clause that applied to the allegations there. Here, Cross-Complainants are suing Nazarenko, who was not a party to the contract with Plaintiffs, and the Loan Agreement (the subject contract) did not provide a distinct remedy in this situation. Nazarenko does not otherwise provide any other supporting authority for their argument in this case that is different from General Commercial.

For these reasons, the court OVERRULES the demurrer to this cause of action.

B. Newly added sixth (conversion) (against all demurring parties) and seventh (fraudulent transfer in violation of Civil Code, §§ 3429 et seq.) causes of action (against all Spiderworx, ALAM and Adams)

Before addressing the demurrer, the Court addresses Nazarenko’s motion to strike (joined by Plaintiffs) as to the added sixth and seventh causes of actions because it is a threshold issue.

The parties argue that the newly added causes of actions are not within the scope of leave granted by the Court.

Courts may, upon a motion, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) Courts may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court's order. [Citation.] The plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend.” (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.)

Here, Cross-Complainants added new claims for conversion and fraudulent transfer in violation of Civil Code section 3439. The Court’s April 23, 2019 minute order did not limit the basis of an amended complaint. Therefore, Defendants can add new causes of action pursuant to the Court’s last order.

Accordingly, the Court will not strike these causes of action.

The Court SUSTAINS the demurrer to the sixth cause of action, because Cross-Complainants assert a generalized claim for money as conversion. (FACC ¶ 37.) This is improper. (Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229, 235.) This is not a tangible piece of property. (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 238.)

The Court SUSTAINS the demurrer to the seventh cause of action because there are no allegations that Adams held the property. As against the other Plaintiffs, the Court would sustain the demurrer because Cross-Complainants do not allege inadequate value, only focusing their pleadings on intent.

C. Eighth cause of action – civil conspiracy (against Nazarenko only)

“Although conspiracy to commit a tort is not a separate cause of action from the tort itself, alleging a conspiracy fastens liability on those who agree to the plan to commit the wrong as well as those who actually carry it out. The elements of a civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act done in furtherance of the common design.” (Stueve Bros. Farms, LLC v. Berger Kahn (2013) 222 Cal.App.4th 303, 323, internal citations omitted (Stueve Bros.).) “The major significance of a conspiracy cause of action lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong … regardless of the degree of his activity. The essence of the claim is that it is merely a mechanism for imposing vicarious liability; it is not itself a substantive basis for liability. Each member of the conspiracy becomes liable for all acts done by others pursuant to the conspiracy, and for all damages caused thereby.” (Id. at pp. 323- 324, internal quotation marks and citations omitted.)

As a preliminary matter, Nazarenko argues that the conspiracy claim fails because the necessary predicate tort (tortious interference) is not properly pleaded. However, the Court overruled the demurrer to that claim and therefore the Court rejects this argument.

Additionally, Nazarenko argues that there can be no conspiracy for tortious interference because Plaintiffs are parties to the Loan Agreements (and thus cannot be involved in tortious interference.) The Court agrees because it is settled law that a party to a contract cannot bring that claim, but must bring another claim like a breach of contract. However, Cross-Complainants argue that there are wrongful acts collectively committed by Cross-Defendants. Nazarenko argues in reply that the civil conspiracy is plead in the FACC “based solely on the alleged interference with contractual relationship. (See FACC at ¶ 109.)” (Reply 4:5.) But this is a misreading of the FAC, which in the operative paragraph 109, the allegation says “Cross-Defendants Adams and Flanders also conspired with Nazarenko to interfere with HTA’s contractual relationship . . . .” (FACC ¶ 109, emphasis added.) The FACC does not adequately plead that the nature of any other wrongful acts Nazarenko participated in.

For these reasons, the court SUSTAINS the demurrer to this cause of action.

D. Ninth cause of action – accounting (against Nazarenko only)

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

Nazarenko argues that Defendants are not entitled to an accounting from Nazarenko because Nazarenko is not a party to any of the Loan Agreements, or any agreements with Defendants. Defendants concede that Nazarenko is not a party to the Loan Agreements, but insists that his conduct creates the necessary relationship for an accounting. (Opposition 12:2-5.) The Court agrees. Here, the FACC alleges a sufficient a relationship between Nazarenko and Defendants that support an accounting based on Nazarenko’s conduct. An accounting is needed to assess the unknown balance based on the alleged sums that were fraudulently retained or transferred to Nazarenko.

For these reasons, the court OVERRULES the demurrer to this cause of action.

E. Eleventh cause of action – violation of Business and Professions Code, §§ 17200, et seq. (the “UCL”) (against Nazarenko only)

The Unfair Competition Law (“UCL”), Business and Professions Code sections 17200, et seq. prohibits unfair competition, including unlawful, unfair, and fraudulent business acts. (Bus. & Prof. Code, § 17200.) Thus, the section prohibits five wrongs: (1) an “unlawful business act or practice,” (2) an “unfair business act or practice,” (3) a “fraudulent business act or practice,” (4) “unfair, deceptive, untrue or misleading advertising,” and (5) “any act prohibited by [Business and Professions Code section 17500 to 17595].”

By proscribing any “unlawful” business practice, the UCL “ ‘ “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable.” (Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) In 1992, the Legislature amended section 17200 to expand the definition of unfair competition to include “any unlawful, unfair, or fraudulent business act or practice,” overruling former case law that had limited the statute’s application to practices involving more than a single transaction. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 570, emphasis in original, superseded by Proposition 64 on unrelated grounds.) As such, a plaintiff may now assert a UCL claim based on a single act or transaction.

Nazarenko argues that FACC does not state which prong Nazarenko violated but suggests all prongs apply but they do not. The Court disagrees. As stated above in connection with the third cause of action, Defendants have alleged sufficient facts to plead claims for tortious interference. That at a minimum satisfies the first prong of an “unlawful business act or practice.” As noted by the Court in its ruling on the previous demurrer, the funds loaned by HTA constituted a vested

interest in the sums that were once in HTA’s possession, as opposed to a contingent expectancy

of payment from a third party. Therefore, it is actionable under the UCL.

For these reasons, the court OVERRULES the demurrer to this cause of action.

Demurrer of Spiderwort, ALAM, and Adams

F. Fourth cause of action – breach of contract (against Adams only)

Plaintiffs argue that Defendants’ amendments did not cure the pleading deficiencies in the breach of contract claim against Adams. Specifically, Plaintiffs argue that the FACC does not sufficiently plead that (1) Adams was a party to the Inducement Agreement and (2) Adams breached the Inducement Agreement.

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

In the Court’s ruling on the previous demurrer, the Court sustained the demurrer with leave to amend. Specifically, the Court held as follows:

The court agrees that the terms of the inducement agreement, as alleged in the Cross-Complaint, only required the submission of the necessary letter of credit and other information and documentation required by PMB and that the provisions of the inducement agreement quoted in the Cross-Complaint do not on their face not guarantee or warrant the approval of the PMB Loan. (See Cross-Compl. ¶ 29.) Accordingly, the court SUSTAINS the demurrer as to the fifth cause of action as to Cross-Defendant Adams with 20 days leave to amend.

(April 23, 2019 Minute Order at p. 14.)

Here, in the FACC, Defendants allege that Adams executed the inducement agreement. (FACC ¶ 29.) However, it is unclear in what capacity Adams executed the inducement agreement. Nowhere does the FACC plead that Adams was a specific “party” to the inducement agreement. There is no allegation showing Adams personally gained anything or promising anything the alleged transaction.

Even if Adams was a party, Defendants fail to allege additional allegations sufficient to state a claim against Adams. Defendants’ attempts to now allege that the letter of credit submitted by PMB was only a “draft” (FACC ¶ 31) and other allegations (FACC ¶ 83) reveal a sham pleading contradicting the prior allegations to circumvent the Court’s original ruling. Defendants do not otherwise explain this inconsistency and the Court therefore ignores it. (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.)

For these reasons, the court SUSTAINS the demurrer to this cause of action.

G. Fifth cause of action – breach of the implied covenant of good faith and fair dealing (against Adams only)

Plaintiffs argue that Defendants’ amendments did not cure the pleading deficiencies in the breach of the implied covenant of good faith and fair dealing against Adams.

The elements for breach of the implied covenant of good faith and fair dealing are: (1) existence of a contract between plaintiff and defendant; (2) plaintiff performed his contractual obligations or was excused from performing them; (3) the conditions requiring defendant’s performance had occurred; (4) the defendant unfairly interfered with the plaintiff’s right to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant’s conduct. (Merced Irr. Dist. v. County of Mariposa (E.D. Cal. 2013) 941 F.Supp.2d 1237, 1280 (discussing California law).) Allegations must demonstrate defendant’s conduct for failure or refusal to discharge contractual responsibilities was a conscious and deliberate act, not an honest mistake, bad judgment or negligence. (Ibid.) “‘[T]he implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract.’” (Ragland v. U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 206 (quoting Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094).)

In the Court’s ruling on the previous demurrer, the Court sustained the demurrer with leave to amend for the same reasons it sustained the fourth (fifth in the initial Cross-Complaint) cause of action. (April 23, 2019 Minute Order at p. 14.)

The parties agree that the Court’s ruling on the contract claim should be the same as for the breach of the covenant of good faith and dealing claim. (Demurrer 8:4-21; Opposition 7:8-12.)

Accordingly, the Court SUSTAINS the demurrer to this cause of action for the same reasons stated above.

H. Seventh (fraudulent transfer in violation of Civil Code, §§ 3429 et seq.) causes of action (against all Spiderworx, ALAM and Adams)

As the Court did not strike this cause of action as stated above, the Court SUSTAINS the demurrer to the seventh cause of action because there are no allegations that Adams held the property. As against the other Plaintiffs, the Court would sustain the demurrer because Cross-Complainants do not allege inadequate value, only focusing their pleadings on intent.

I. Motion to strike

Nazarenko moves to strike (joined by Plaintiffs) punitive damages and attorney fees.

Courts may, upon a motion, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) Courts may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

Punitive damages

California Civil Code, Section 3294 authorizes punitive damages upon a showing of malice, fraud, or oppression, which are defined as follows:

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

  1. “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

  2. “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

    Punitive damages thus require more than the mere commission of a tort. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95.) Specific facts must be pled in support of punitive damages. (Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-392.)

    Here, the Court overruled the demurrer to the third cause of action for tortious interference. Therefore, there are sufficient facts, to support a prayer for punitive damages. The Court rejects the argument that there are insufficient facts to demonstrate oppression, fraud, or malice. Viewing the allegations of the FACC liberally and in context, these allegations are sufficient to show intentional tortious interference and other misconduct to deprive Cross-Complainants their expected economic benefits.

    For these reasons, the court DOES NOT STRIKE the prayer for punitive damages.

    Attorney fees

    Unless provided for by agreement or statute, parties bear their own attorney fees. (Code Civ. Proc., § 1021.)

    Cross-Complainants do not assert in their FACC a specific legal basis for a prayer for attorney fees. However, in opposition, Cross-Complainants argue that a prayer for attorney fees is appropriate pursuant to the “tort of another” doctrine in Prentice v. North Am. Title Guaranty Corp., Alameda Division (1963) 59 Cal.2d 618 (Prentice).

    Attorney fees may be recovered under the “third-party tort” theory, also referred to as the “tort of another” theory, even though there is no express contract provision for the payment of fees as an element of damages proximately caused. (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505.) Under the “tort of another” doctrine, a person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney fees, and other expenditures thereby suffered or incurred. (Prentice, supra, 59 Cal.2d at p. 620.)

    Nazarenko argues that this doctrine should not apply because Prentice says the entitlement to recover attorney fees as “damages.” Here, although the FACC does not allege that attorney fees were incurred because of the alleged improper actions, it can be liberally read from context that they were necessary for Cross-Complainants to sue based on the alleged torts committed by Plaintiffs and Nazarenko. Cross-Complainants are not required at the pleading stage to provide more details at this time concerning the grounds for this relief.

    For these reasons, the court DOES NOT STRIKE the prayer for attorney fees.

Leave to Amend

“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 (Goodman).) “When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.” (Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768.)

Here, the Court will hear from Cross-Complainants concerning leave for amend, but is inclined to deny leave to amend unless sufficiently addressed at the hearing.

Conclusion

For these reasons, the Court (1) OVERRULES the demurrer to the third, ninth, and eleventh causes of action; and (2) SUSTAINS the demurrers to the fourth, fifth, sixth, seventh and eighth causes of action.

The Court DENIES the motion to strike the sixth and seventh causes of action and the remaining requests to strike punitive damages and attorney fees.

Counsel for Nazarenko to give notice.

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