This case was last updated from Los Angeles County Superior Courts on 03/11/2022 at 11:11:06 (UTC).

ZHAO HUI SHI ET AL VS RACHEL H LEW ET AL

Case Summary

On 05/25/2017 ZHAO HUI SHI filed a Property - Other Property Fraud lawsuit against RACHEL H LEW. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The case status is Pending - Other Pending.
Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****2775

  • Filing Date:

    05/25/2017

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Property - Other Property Fraud

  • County, State:

    Los Angeles, California

 

Party Details

Plaintiffs and Appellants

SHI ZHAO HUI

LU JUN

Defendants and Respondents

THROPAY JOHN P.

LEW RACHEL H.

MILLER MAYER LLP

WOLFDORF ROSENTHAL LLP

US REGIONAL ECONOMIC DEVELOPMENT AUTH.

DERRICO DAVID GERALD

Not Classified By Court

WILCOX #9178 WIL S.

GUERRA #10977 SANDRA

Attorney/Law Firm Details

Plaintiff Attorney

SCANDURA STEVEN

Defendant Attorneys

BRYNER CANDICE

DAVIDOVICH NIV V.

NEWCOMB JENNIFER E.

SAUNDERS JENNIFER K.

WAXLER ANDREW J.

 

Court Documents

Stipulation and Order - STIPULATION AND ORDER STIPULATION AND ORDER STRIKING CLASS ACTION CLAIM AGAINST RACHEL H. LEW

9/28/2020: Stipulation and Order - STIPULATION AND ORDER STIPULATION AND ORDER STRIKING CLASS ACTION CLAIM AGAINST RACHEL H. LEW

Declaration - DECLARATION OF JENNIFER E. NEWCOMB IN SUPPORT OF DEMURRER

9/29/2020: Declaration - DECLARATION OF JENNIFER E. NEWCOMB IN SUPPORT OF DEMURRER

Demurrer - without Motion to Strike

9/29/2020: Demurrer - without Motion to Strike

Request for Judicial Notice

9/29/2020: Request for Judicial Notice

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 10/01/2020

10/1/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (COURT ORDER) OF 10/01/2020

Minute Order - MINUTE ORDER (COURT ORDER)

10/1/2020: Minute Order - MINUTE ORDER (COURT ORDER)

Memorandum of Costs After Judgment, Acknowledgment of Credit, and Declaration of Accrued Interest

10/13/2020: Memorandum of Costs After Judgment, Acknowledgment of Credit, and Declaration of Accrued Interest

Answer

10/13/2020: Answer

Notice - NOTICE RETURN OF ISSUED WRIT

10/13/2020: Notice - NOTICE RETURN OF ISSUED WRIT

Writ of Execution - WRIT OF EXECUTION (LOS ANGELES)

10/14/2020: Writ of Execution - WRIT OF EXECUTION (LOS ANGELES)

Notice of Change of Address or Other Contact Information

11/17/2020: Notice of Change of Address or Other Contact Information

Opposition - OPPOSITION PLAINTIFFS OPPOSITION TO DEFENDANT MILLER MAYERS DEMURRER TO FOURTH AMENDED COMPLAINT; AND MEMORANDUM OF POINTS AND AUTHORITIES

12/28/2020: Opposition - OPPOSITION PLAINTIFFS OPPOSITION TO DEFENDANT MILLER MAYERS DEMURRER TO FOURTH AMENDED COMPLAINT; AND MEMORANDUM OF POINTS AND AUTHORITIES

Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF REPLY IN SUPPORT OF DEFENDANT MILLER MAYER LLPS DEMURRER TO PLAINTIFFS FOURTH AMENDED COMPLAINT

1/4/2021: Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF REPLY IN SUPPORT OF DEFENDANT MILLER MAYER LLPS DEMURRER TO PLAINTIFFS FOURTH AMENDED COMPLAINT

Reply - REPLY IN SUPPORT OF DEFENDANT MILLER MAYER LLP'S DEMURRER TO PLAINTIFFS' FOURTH AMENDED COMPLAINT

1/4/2021: Reply - REPLY IN SUPPORT OF DEFENDANT MILLER MAYER LLP'S DEMURRER TO PLAINTIFFS' FOURTH AMENDED COMPLAINT

Objection - OBJECTION EVIDENTIARY OBJECTIONS TO OPPOSITION FILED TO DEFENDANT MILLER MAYER LLP'S DEMURRER TO PLAINTIFFS' FOURTH AMENDED COMPLAINT

1/4/2021: Objection - OBJECTION EVIDENTIARY OBJECTIONS TO OPPOSITION FILED TO DEFENDANT MILLER MAYER LLP'S DEMURRER TO PLAINTIFFS' FOURTH AMENDED COMPLAINT

Supplemental Declaration - SUPPLEMENTAL DECLARATION OF JENNIFER E. NEWCOMB IN SUPPORT OF REPLY IN SUPPORT OF DEFENDANT MILLER MAYER LLP'S DEMURRER TO PLAINTIFFS' FOURTH AMENDED COMPLAINT

1/4/2021: Supplemental Declaration - SUPPLEMENTAL DECLARATION OF JENNIFER E. NEWCOMB IN SUPPORT OF REPLY IN SUPPORT OF DEFENDANT MILLER MAYER LLP'S DEMURRER TO PLAINTIFFS' FOURTH AMENDED COMPLAINT

Order Appointing Court Approved Reporter as Official Reporter Pro Tempore

1/11/2021: Order Appointing Court Approved Reporter as Official Reporter Pro Tempore

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

1/11/2021: Minute Order - MINUTE ORDER (HEARING ON DEMURRER - WITHOUT MOTION TO STRIKE)

506 More Documents Available

 

Docket Entries

  • 10/19/2022
  • Hearing10/19/2022 at 08:30 AM in Department 37 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

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  • 02/25/2022
  • DocketAppeal Record Delivered; Filed by Clerk

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  • 02/22/2022
  • DocketNotice (Notice of Address Change and Request for Electronic Service); Filed by Rachel H. Lew (Defendant)

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  • 01/21/2022
  • DocketAppeal - Notice Court Reporter to Prepare Appeal Transcript; Filed by Clerk

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  • 12/30/2021
  • Docketat 08:30 AM in Department 37; Hearing on Motion - Other (Certification of Class of Plaintiffs Against Defendant Thropay) - Not Held - Advanced and Continued - by Court

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  • 12/29/2021
  • DocketAppeal - Ntc Designating Record of Appeal APP-003/010/103 ("U1"); Filed by Jun Lu (Appellant); Zhao Hui Shi (Appellant)

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  • 12/28/2021
  • Docketat 10:00 AM in Department 37; Jury Trial - Not Held - Advanced and Vacated

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  • 12/21/2021
  • Docketat 08:30 AM in Department 37; Final Status Conference - Not Held - Taken Off Calendar by Court

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  • 12/21/2021
  • Docketat 08:30 AM in Department 37; Hearing on Motion to Continue Trial - Not Held - Advanced and Continued - by Court

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  • 12/21/2021
  • DocketMinute Order ( (Final Status Conference)); Filed by Clerk

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787 More Docket Entries
  • 08/11/2017
  • DocketCASE MANAGEMENT STATEMENT

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  • 08/01/2017
  • DocketOSC-RE Other (Miscellaneous); Filed by Clerk

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  • 08/01/2017
  • DocketProof-Service/Summons; Filed by Zhao Hui Shi (Plaintiff)

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  • 08/01/2017
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

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  • 08/01/2017
  • DocketORDER TO SHOW CAUSE HEARING

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  • 08/01/2017
  • DocketPROOF OF SERVICE SUMMONS

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  • 08/01/2017
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 05/25/2017
  • DocketComplaint; Filed by Zhao Hui Shi (Plaintiff); Jun Lu (Plaintiff)

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  • 05/25/2017
  • DocketSUMMONS

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  • 05/25/2017
  • DocketCONPLAINT FOR: (1) FRAUD ;ETC

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Tentative Rulings

b'

Case Number: ****2775 Hearing Date: October 15, 2021 Dept: 37

HEARING DATE: October 15, 2021

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Plaintiff, Zhao Hui Shi

OPPOSING PARTIES: Defendants, John P. Thropay, and Rachel H. Lew

TRIAL DATE: December 28, 2021

PROOF OF SERVICE: OK

MOTION: Plaintiff’ Motion for Class Certification

OPPOSITION: October 1, 2021

REPLY: October 8, 2021

TENTATIVE: Plaintiff’s motion is denied. Thropay is to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program. Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “Program”). Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rotenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”).

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property.

On August 27, 2020, Plaintiffs filed their operative Fourth Amended Complaint. (“4AC”) The 4AC alleges the same four causes of action as the FAC.

On July 19, 2021, Thropay’s motion to continue trial was granted. The court’s ruling on Thropay’s motion also specifically held: “Plaintiff is ordered to file a motion for class certification to be heard in the next 90 days. The failure to do so may result in an order striking the class allegations.” (see July 19, 2021 Minute Order, p. 1.)

Plaintiff now moves, pursuant to Code of Civil Procedure section 382, for an order which certifies a class of 65 Plaintiffs against Thropay. Thropay opposes the motion. Lew also opposes the motion.

Request for Judicial Notice

Plaintiff requests judicial notice of the following in support of their motion:

  1. Order Granting Summary Judgment in USCD Case no. 8:16-cv-00974-CJC-AGR.

  2. Declaration of Declaration of Lorraine Pearson in Support of Plaintiff Securities and Exchange Commission’s ex Parte Application for a Temporary Restraining Order filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto

  3. Declaration of Michael Cogswell in Support of Defendant Beverly Proton Center LLC’s, Opposition to Preliminary Injunction filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto.

  4. Declaration of Jacob A. Regenstreif in Support of Plaintiff Securities and Exchange Commission’s ex Parte Application for a Temporary Restraining Order filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto.

  5. Declaration of Hervé Gouraige in Opposition to Securities and Exchange Commission Motion for Disgorgement Against Defendants Charles C. Liu and Xin Wang filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto.

  6. Declaration of Hervé Gouraige in Opposition to Plaintiff’s Motion to Continue Asset Freeze filed in USCD Case no. 8:16-cv-00974-CJCAGR, and the exhibits thereto.

  7. Declaration of John W. Berry in Support of Plaintiff Securities and Exchange Commission’s Motion for the Appointment of a Monitor filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto.

  8. Supplemental Declaration of Gary Y. Leung in Support of Plaintiff Securities and Exchange Commission’s Motion for Disgorgement Against Defendants Liu and Wang filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto.

  9. Declaration of Gary Y. Leung in Support of Plaintiff Securities and Exchange Commission’s Motion for Disgorgement Against Defendants Liu and Wang filed in USCD Case no. 8:16-cv-00974-CJC-AGR, and the exhibits thereto.

  10. Deposition of John Thropay, M.D. taken March 5, 2021 in USCD Case no. 8:16-cv-00974-CJC-AGR.

  11. Deposition of Ruth Lopez Novodor taken February 22, 2021 in USCD Case no. 8:16-cv-00974-CJC-AGR.

  12. Deposition of Charles C. Liu taken March 23, 2016, in SEC Matter no. LA-04639-A

  13. Deposition of Charles C. Liu taken February 24, 2021, in USCD Case no. 8:16-cv-00974-CJC-AGR.

    Thropay objects to each document in Plaintiff’s request for judicial notice on the following grounds: (1) Plaintiff may not request judicial notice of the truth of the matters asserted, (2) the documents lack authentication, (3) the documents lack foundation, (4) the documents are inadmissible hearsay, (5) the documents are irrelevant and prejudicial. Thropay also objects to certain documents in Plaintiff’s request for judicial notice on the grounds that they constitute improper oral testimony regarding the contents of a writing in violation of Evidence Code section 1523.

    Thropay also requests judicial notice of the following in support of his opposition:

  1. Court’s ruling and minute order dated August 28, 2018, issued in this action.

  2. Court’s ruling and minute order dated September 6, 2018, issued in this action.

  3. Court’s ruling and minute order dated November 6, 2019, issued in this action.

  4. Court’s ruling and minute order dated January 11, 2021, issued in this action.

  5. Correspondence dated September 27, 2021 from Jonathan Carr of the Securities and Exchange Commission to Molly White, Esq.

  6. Court’s ruling and minute order dated September 21, 2021, issued in this action.

  7. Court’s ruling and minute order dated July 19, 2021, issued in this action.

  8. Plaintiffs’ Ex Parte Application for Order to Shorten Time to Continue Trial.

  9. Court’s September 16, 2021 tentative ruling and order issued on Plaintiffs’ Ex Parte Application for Order to Shorten Time to Continue Trial.

  10. Court’s ruling and minute order dated June 17, 2019, issued in this action.

  11. Court’s ruling and minute order dated November 15, 2019, issued in this action.

  12. Court’s ruling and minute order dated February 25, 2020, issued in this action.

  13. Final Judgment and Order as to Defendants Charles C. Liu and Xin Wang aka Lisa Wang, issued in the action entitled: Securities and Exchange Commission v. Charles C. Liu, et al., United States District Court, Central District of California, Case No.: 8:16-cv-00974-CJCAGR.

  14. Abstract of Judgment (civil penalty) entered as to Charles C. Liu, issued in the action entitled: Securities and Exchange Commission v. Charles C. Liu, et al., United States District Court, Central District of California, Case No.: 8:16-cv-00974-CJC-AGR.

  15. Abstract of Judgment (disgorgement) entered as to Charles C. Liu, issued in the action entitled: Securities and Exchange Commission v. Charles C. Liu, et al., United States District Court, Central District of California, Case No.: 8:16-cv-00974-CJC-AGR.

  16. Abstract of Judgment (civil penalty) entered as to Xin Wang aka Lisa Wang, issued in the action entitled: Securities and Exchange Commission v. Charles C. Liu, et al., United States District Court, Central District of California, Case No.: 8:16-cv-00974-CJC-AGR.

  17. Complaint filed in the action entitled: Securities and Exchange Commission v. Charles C. Liu, et al., United States District Court, Central District of California, Case No.: 8:16-cv-00974-CJC-AGR.

    Thropay’s objections to Plaintiff’s requests are overruled, and both parties’ requests are granted. The existence and legal significance of these documents are proper matters for judicial notice, reasonably disputable assertions of material fact contained therein-particularly with respect to the declarations-are not. (Evidence Code ;; 452, subds. (d), (h).)

    Discussion

  1. Legal Authority

Pursuant to Code of Civil Procedure section 382, “[i]f the consent of any one who should have been joined as plaintiff cannot be obtained, he may be made a defendant, the reason thereof being stated in the complaint; and when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” The community of interest requirement entails showing that: (1) predominant common questions of law or fact exist; (2) the class representatives have claims or defenses typical of absent class members; and (3) the class representatives and their counsel can adequately represent the interests of the class. (Brinker Rest. Corp. v. Superior Court, (2012) 53 Cal. 4th 1004, 1021. (Brinker).)

California courts consider “pattern and practice evidence, statistical evidence, sampling evidence, expert testimony, and other indicators of a defendant’s centralized practices in order to evaluate whether common behavior towards similarly situated plaintiffs makes class certification appropriate.” (Sav-On Drug Stores, Inc. v. Superior Court, (2004) 34 Cal. 4th 319, 333. (Sav-On).) The burden is on the party seeking class certification to establish each of the class prerequisites through substantial evidence. Id. at 327. When determining certification, the Court examines all presented evidence “under the prism of [the] plaintiff’s theory of recovery.” (Dep’t of Fish & Game v. Superior Court, (2011) 197 Cal. App. 4th 1323, 1349.)

When weighing the evidence, the Court does not evaluate the merits of the asserted claims. (Linder v. Thrifty Oil Co., (2000) 23 Cal. 4th 429, 439-40.) Rather, the primary question on certification is “whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.” (Sav-On, supra 34 Cal. 4th at 327.)

  1. Analysis

  1. Procedural Arguments

Thropay argues that Plaintiff’s entire motion is procedurally deficient because it was untimely pursuant to California Rules of Court, rule 3.764 and because it was not filed “when practicable.” (Thropay Opposition, 7-8.) In reply, Plaintiff contends that the motion was timely because Plaintiff asked at the Ex Parte Hearing for the court to set a briefing schedule for the instant motion, the court did not do so, and Thropay did not object. (Reply, 1-2.) Plaintiff additionally contends that the motion was filed when practicable because the instant action has been appealed twice, with the most recent remittitur being issued on July 14, 2021. (Reply, 2-3.) Additionally, Plaintiff contends that she were specifically permitted to file the instant motion by this court on July 19, 2021. (Reply, 2-3.)

Pursuant to California Rules of Court, rule 3.764, subdivision (c)(1), “[n]otice of a motion to certify or decertify a class or to amend or modify a certification order must be filed and served on all parties to the action at least 28 calendar days before the date appointed for hearing. Any opposition to the motion must be served and filed at least 14 calendar days before the noticed or continued hearing, unless the court for good cause orders otherwise. Any reply to the opposition must be served and filed at least 5 calendar days before the noticed or continued date of the hearing, unless the court for good cause orders otherwise. The provisions of Code of Civil Procedure section 1005 otherwise apply.”

Additionally, “ [a] motion for class certification should be filed when practicable. In its discretion, the court may establish a deadline for the filing of the motion, as part of the case conference or as part of other case management proceedings. Any such deadline must take into account discovery proceedings that may be necessary to the filing of the motion.” (Cal. Rules of Court, Rule 3.764, subd. (b).)

The court agrees with Plaintiff that the motion is timely. Pursuant to California Rules of Court, rule 3.764, subdivision (b), the court has authority to set a deadline for filing a motion for class certification, which the court did by setting a deadline of 90 days at the July 19, 2021 hearing on Thropay’s motion to continue trial. Additionally, as Plaintiff has pointed out, the Court of Appeal issued their remittitur on the most recent appeal in this action on July 14, 2021. Thus, the motion was not untimely.

  1. Ascertainability, Numerosity

A proposed class must be sufficiently ascertainable and numerous to be certified. (Daar v. Yellow Cab Co., (1967) 67 Cal. 2d 695, 704.) First, “[a]scertainability is required in order to give notice to putative class members as to whom the judgment in the action will be res judicata.” (Hicks v. Kaufman & Broad Home Corp., (2001) 89 Cal. App. 4th 908, 914.) “Whether a class is ascertainable is determined by examining (1) the class definition, (2) the size of the class, and (3) the means available for identifying class members.” (Reyes v. San Diego Cnty. Bd. of Supervisors, (1987) 196 Cal. App. 3d 1263, 1271.) The plaintiff bears the burden of establishing the existence of an ascertainable class. (Sav-On , supra, 34 Cal. 4th at 326.) Second, the identified class must be so numerous as to make joinder of all parties impractical. (Hendershot v. Ready to Roll Transp., Inc., (2014) 228 Cal. App. 4th 1213, 1222.) “No set number is required as a matter of law for the maintenance of a class action.” (Rose v. City of Hayward, (1981) 126 Cal. App. 3d 926, 934.)

Plaintiff argues that the proposed class of 65 class members is already ascertained and have “immigration counsel” through whom they can be easily notified. (Motion, 25-27.) Plaintiff’s notice of motion lists 65 individuals in the proposed class. (Motion, 2-4.) According to Plaintiff, these individuals are listed on various investor lists prepared by Liu and others in an action by the Securities and Exchange Commission. (“SEC”) (Motion, 25; RJN, Exhibits D, E, H, Q.)

Lew submits a limited opposition to Plaintiff’s motion on the grounds that it has been unreasonably delayed and that the class allegations were already stricken as to Lew. (see Lew Opposition, 2.) Additionally, Lew argues that to the extent the motion is a “pretext for a trial continuance or the reopening of discovery,” Lew opposes the motion and joins in Thropay’s opposition. (Id.)

In opposition, Thropay contends that Plaintiff’s motion is based on inadmissible evidence because the motion largely relies on evidence from the SEC’s federal action against Liu and Wang, which is only admissible for a limited purpose. (Opposition, 8-9.) Moreover, Thropay contends that Plaintiff’s proposed class is not ascertainable because Plaintiff relies on inadmissible evidence in support of her contentions and fails to demonstrate how the proposed class members can be “easily notified” other than unsupported statements to this effect. (Opposition, 9-11.)

In reply, Plaintiff contends that the declaration in her Request for Judicial Notice are admissible because each of them are executed under penalty of perjury and Thropay does not assert that any of them are false or fake. (Reply, 3-4.) Plaintiff also asserts that the class is already ascertained because Thropay was the Chairman and CEO of the company of which the proposed class were shareholders, and thus “could be ordered to give notice to his own shareholders.” (Reply, 5.)

The court finds that the proposed class is sufficiently numerous and ascertainable. The proposed class contains 65 members, who are listed by name in the notice of motion and whose names can be found in the documents for which Plaintiffs seek judicial notice.

  1. Predominance of Common Questions of Law or Fact

“As part of the community of interest requirement, the party seeking certification must show that issues of law or fact common to the class predominate.” (Duran v. U.S. Bank Nat’l Ass’n, (2014) 59 Cal. 4th 1, 28 (Duran) (citing Richmond v. Dart Indus., Inc., (1981) 29 Cal. 3d 462, 470.) The “ultimate question” in predominance analysis is whether “the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.” (Collins v. Rocha, (1972) 7 Cal. 3d 232, 238.) That answer hinges on “whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.” (Sav-On ,supra, 34 Cal. 4th at 327.) Generally, if the defendant’s liability can be proved by common facts, then a class will be certified, even if its members must prove their damages individually. (Duran, supra, 59 Cal. 4th at 28 (citing Brinker, 53 Cal. 4th at 1021-22). Nevertheless, class certification is inappropriate “if every member of the alleged class would be required to litigate numerous and substantial questions determining his individual right to recover following the ‘class judgment’” on common issues. (City of San Jose v. Superior Court, (1974), 12 Cal. 3d 447, 459; see Arenas v. El Torito Rest., Inc., (2010) 183 Cal. App. 4th 723, 732 (“If the class action ‘will splinter into individual trials, common questions do not predominate and litigation of the action in the class format is inappropriate.’”).

Plaintiff contends that common questions of law and fact predominate for the proposed class because the proposed class each relied on Thropay’s representations, and the “fiduciary relationship creates a presumption of reliance.” (Motion, 24-25.) Additionally, Plaintiff contends that the issues surrounding Thropay’s liability “turn on a commons set of facts and common legal principles.” (Id.)

In opposition, Thropay contends that common questions of law and facts do not exist as Plaintiff’s 4AC asserts three causes of action against Thropay, none of which are based on a theory of vicarious liability. (Opposition, 11-12.) Additionally, Thropay contends that common questions of law and fact do not exist because proof of fraud requires individualized analysis that is inconsistent with class treatment. (Opposition, 12-16.) Thropay additionally contends that the Penal Code section 496 cause of action is also inconsistent with class treatment because Plaintiff fails to show Thropay’s knowledge and intent to receive stolen funds. (Opposition, 16-17.)

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.)

In reply, Plaintiff contends that there is “substantial evidence of reliance which is based on common proof.” (Reply, 6-9.) According to Plaintiff, the following facts demonstrate that there are common questions of law and fact: (1) “each class member paid $500,000,” (2) “the entire enterprise was fake through and through,” (3) “no reasonable person would invest $500,000 in an enterprise after receiving a disclosure from its CEO that the business was not being run above-board.” (Reply, 6-7.) According to Plaintiff, it is not necessary to prove that the proposed class members received representations “because the traunches were sold by sales agents.” (Reply, 8.) However, Plaintiff admits that “it is probable that every investor heard a slightly different sales pitch.” (Reply, 8.)

The court finds that common questions of law and fact do not predominate for the proposed class. Plaintiff argues that every question surrounding Thropay’s liability depends on common facts or legal principles but fails to demonstrate how this is the case, other than unsupported statements to this effect. Plaintiff also argues that common questions of fact and law predominate because the Program was fake and/or fraudulent, but also fails to demonstrate how this is the case. In fact, Plaintiff admits that the proposed class members probably heard different sales pitches prior to investing in the Program. Plaintiff’s declaration recites her own transactions which were dependent on the presentation made to her. There is no evidence that her transaction was typical. The court agrees with Thropay that proof of fraud requires individualized analysis that is inconsistent with class treatment. A determination of Thropay’s liability to each class member for fraud or negligent misrepresentation requires an individualized analysis into each class member’s reliance on Thropay’s misrepresentations, which will splinter the action into individualized trials and is inconsistent with class treatment.

  1. Typicality of Class Representatives’ Claims

The typicality requirement exists to ensure that the interests of the named representatives align with the interests of the class. (Johnson v. GlaxoSmithKline, Inc., (2008) 166 Cal. App. 4th 1497, 1509.) “Typicality refers to the nature of the claim or defense of the class representative, and not to the specific facts from which it arose or the relief sought.” (Id.) (internal quotation marks and citations omitted). Thus, the crux of the typicality inquiry relies on “whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” (Id.)

Plaintiff’s motion does not separately address why her claims are typical of the proposed class, other than the above discussed arguments about how common questions of law and fact predominate for the proposed class.

In opposition, Thropay contends that Plaintiff’s claims are not typical of the proposed class because there is no admissible evidence that Plaintiff’s claims against Thropay are typical of other class members’ claims. (Opposition, 17-18.) According to Thropay, no one Plaintiff’s claims would be typical given the long time period of the Program and the differing points in time of each proposed class member’s investment. (Id.)

In reply, Plaintiff contends that all claims are typical because “the most important fact is that the entire venture was a fraud through and through.” (Reply, 9-10.) According to Plaintiff, the most important misrepresentations to each proposed class member were identical because no version of the POM discloses that the investors’ funds would be pooled or that Thropay would not be involved in management. (Id.)

The court finds that Plaintiff’s claims have some typicality with the claims of the proposed class but also show atypical claims. Although each proposed class member’s claims may have arisen at different points and due to slightly different facts, the nature of Plaintiff’s claims alleging loss of her investment based on Thropay’s involvement in the Program is the same as the other class members, although there may be no proof of that fact.

  1. Adequacy of Representation

Adequacy of representation must be shown as to both the class representatives and the putative class’s counsel. (Richmond v. Dart Industries, Inc., (1981) 29 Cal. 3d 462.) Adequacy ordinarily turns on whether there is a conflict as to the litigation itself. (See Capitol People First v. State Dep’t of Developmental Servs., (2007) 155 Cal. App. 4th 676, 696-97.) When resolving adequacy questions, the Court evaluates “the seriousness and extent of conflicts involved compared to the importance of issues uniting the class; the alternatives to class representation available; the procedures available to limit and prevent unfairness; and any other facts bearing on the fairness with which the absent class member is represented.” (Id. at 697 (internal quotation marks omitted).)

Plaintiff argues that Plaintiff and her counsel have demonstrated “tenacity” to represent the proposed class. (Motion, 8.) In opposition, Thropay contends that Plaintiff and her counsel cannot adequately represent the class because neither Plaintiff nor her counsel have submitted any evidence demonstrating that she would make an adequate class representative. (Opposition, 18-21.) Thropay additionally contends that Plaintiff’s counsel has not demonstrated ability to represent the class because he waited over four years to file the instant motion, has not taken a single deposition during this action, and has taken minimal precertification discovery. (Id.)

In reply, Plaintiff represents that she and her counsel have demonstrated tenacity to pursue claims of the proposed claims because Plaintiff “has not given up on the class members” and her counsel has spent “over a thousand hours” on this case, demonstrating that his interests are “fully aligned with those of the class.” (Reply, 10.)

While the court is concerned that it had to order class counsel to file a motion for class certification on the eve of the scheduled trial date and there is no evidence submitted that the class representative is willing to act as the class representative or understands her obligations as class representative, the court does not find that Plaintiff and her counsel are inadequate representatives of the class. There is no evidence that the proposed class members oppose Plaintiff or her counsel’s representation. Although Plaintiff’s counsel may not have been diligent in prosecuting this action on past occasions, this is not sufficient grounds to find Plaintiff’s counsel an inadequate class representative.

  1. Superiority of Class Treatment

Courts are required to carefully weigh the respective benefits and burdens, and to allow maintenance of the class action only where substantial benefits accrue, both to litigants and the courts. (Linder v. Thrifty Oil Co., (2000) 23 Cal. 4th 429, 435.) Trial courts must pay careful attention to manageability concerns “when deciding whether to certify a class action.” (Duran v. U.S. Bank Nat’l Ass’n, (2014) 59 Cal. 4th 1, 29.) In a court’s consideration of whether a class action is a superior device for resolving a controversy, “the manageability of individual issues is just as important as the existence of common questions uniting the proposed class.” (Id.) Thus, under California law, a class action is not “superior” where there are numerous and substantial questions affecting each class member’s right to recover, following determination of liability to the class as a whole. (City of San Jose v. Superior Court, (1974) 12 Cal. 3d 447, 459.)

Plaintiff argues that certifying the proposed class is in the interest of justice because most of the proposed class members reside in China and thus, would have to overcome “insurmountable hurdles” to litigate this action if class certification is denied. (Motion, 27.) Plaintiff also argues that condensing all of the proposed class members’ testimony and evidence into one trial would be a cost savings for all parties and the court. (Id.)

In opposition, Thropay contends that proceeding as a class is not superior to other methods. (Opposition, 21-23.) According to Thropay, proceeding with this action as a class action would make litigation “virtually impossible” given the necessity of conducting individualized inquiries, foreign jurisdiction issues due to the proposed class members living in China, and Plaintiff’s failure to demonstrate that each of the class members would receive proper notice of the class action. (Id.) Thropay also asserts that the proposed class members have another remedy in that the SEC has already filed an action against Liu and Wang to recover the funds invested in the Program. (Opposition, 22-23.)

The court agrees with Thropay that proceeding as a class is not superior to other methods. As discussed above, a determination of Thropay’s liability to each class member requires an individualized analysis, which will necessarily lead to mini-trials that are not amenable to class treatment. Additionally, the court agrees with Thropay that Plaintiff has not demonstrated that each class member can be easily notified, other than Plaintiff’s representation that each can be contacted through “immigration attorneys.”

Having found that common questions of law and fact do not predominate and that class treatment is not a superior method to resolve the proposed class members’ controversy, Plaintiff’s motion is denied.

Conclusion

Plaintiff’s motion is denied. Thropay is to give notice.

'


b"

Case Number: ****2775 Hearing Date: July 19, 2021 Dept: 37

HEARING DATE: July 19, 2021

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Defendant, John P. Thropay

OPPOSING PARTIES: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: July 27, 2021

PROOF OF SERVICE: OK

MOTION: Defendant’s Motion to Continue Trial

OPPOSITION: July 6, 2021

REPLY: July 12, 2021

TENTATIVE: Thropay’s motion is granted. Trial is continued to August 2, 2022, at 10:a.m. in this department. The Final Status Conference is continued to July 26, 2022, at 8:30 a.m. in this department. Plaintiff is ordered to file a motion for class certification to be heard in the next 90 days. The failure to do so may result in an order striking the class allegations. All cut-off dates based on the trial date are not continued. Thropay is to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program. Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”). Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rotenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”).

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property.

On August 27, 2020, Plaintiffs filed their operative Fourth Amended Complaint. (“4AC”) The 4AC alleges the same four causes of action as the FAC.

On January 11, 2021, the court sustained Defendant Miller Mayer’s demurrer to the 4AC’s class action allegations and fourth cause of action, without leave to amend. On January 13, 2021, moving defendant Thropay filed a Substitution of Attorney for his new counsel, Niv V. Davidovich of Davidovich Stein Law Group, LLP.

On May 12, 2021, Lew’s motion for judgment on the pleadings as to the 4AC’s fourth cause of action was denied without prejudice.

On June 21, 2021, Thropay filed the instant motion to continue trial, with an initial hearing date of December 21, 2021. On June 23, 2021, Thropay’s Ex Parte Application for an Order Shortening Time on the hearing for the instant motion was granted. The hearing was set for July 19, 2021.

On July 6, 2021, Plaintiffs filed their opposition to the instant motion.

Thropay’s motion now comes on for hearing.

Discussion

  1. Legal Standard

California law strongly disfavors continuances of trials, and California Rules of Court, rule 3.1332 provides that “trial dates are firm” and “[a]ll parties and their counsel must regard the date set for trial as certain.” (Cal. Rules of Court, rule 3.1332(a).) “The court may grant a continuance only on an affirmative showing of good cause requiring the continuance.” (Id., rule 3.1332(c).) Listed ground for a continuance include:

(1) The unavailability of an essential lay or expert witness because of death, illness, or other excusable circumstances;

(2) The unavailability of a party because of death, illness, or other excusable circumstances;

(3) The unavailability of trial counsel because of death, illness, or other excusable circumstances;

(4) The substitution of trial counsel, but only where there is an affirmative showing that the substitution is required in the interests of justice;

(5) The addition of a new party if:

(A) The new party has not had a reasonable opportunity to conduct discovery and prepare for trial; or

(B) The other parties have not had a reasonable opportunity to conduct discovery and prepare for trial in regard to the new party's involvement in the case;

(6) A party’s excused inability to obtain essential testimony, documents, or other material evidence despite diligent efforts; or

(7) A significant, unanticipated change in the status of the case as a result of which the case is not ready for trial.

(Cal. Rules of Court, rule 3.1332(c).) “The party must make the motion or application as soon as reasonably practical once the necessity for the continuance is discovered.” (Id., rule 3.1332(b).)

  1. Analysis

Thropay contends that good cause exists to continue trial because his current counsel just substituted into the case earlier this year and requires more time to prepare for trial given the nature of Plaintiffs’ claims against Thropay. (Motion, 7-9.) Additionally, Thropay contends that good cause exists to continue trial because no party will be prejudiced by the continuance, as the first continuance was requested by Plaintiffs and the second continuance was made by the court sua sponte. (Id.) Thropay argues that no parties will be prejudiced by the continuance because the parties previously agreed on stipulating to continue trial before Plaintiffs counsel withdrew his agreement and refused to sign the stipulation. (Id.)

Thropay submits the declaration of his counsel, Elan N. Stone (“Stone”) in support of the instant motion. Stone attests that his office substituted in as new counsel for Thropay earlier this year and that despite this case being filed some time ago, the window for discovery was “unusually limited” due to “numerous appeals, stays, and amended complaints.” (Stone Decl. ¶¶ 19-20.) Additionally, Stone attests that the parties agreed on stipulating to continue trial without reopening discovery but that counsel for Plaintiffs later informed the parties that Plaintiffs would only sign a stipulation if Lew would withdraw her expert designation. (Stone Decl. ¶ 21.) Lew subsequently did withdraw her expert designation but Plaintiffs counsel now refuses to enter into a stipulation to continue the trial date. (Stone Decl. ¶ 22.)

Plaintiffs do not oppose Thropay’s request for a trial continuance generally. Instead, Plaintiffs’ opposition only raises the following points: (1) Plaintiffs’ counsel has a prepaid trip for August 17 to August 24, 2021, (2) Plaintiffs’ “prefer that trial not be continued,” and (3) the five -year statute “likely expires” on May 25, 2022. (Opposition, 1-2.) However, pursuant to Emergency Rule 10(a) promulgated in response to the COVID 19 pandemic, the time to bring the case to trial under Code of Civil Procedure section 583.310 is extended by six months.

In reply, Thropay represents that he is amendable to a shorter trial continuance, with trial to begin towards the “end of 2021” or “early-2022.” (Reply, 2.) Thropay also argues that he will be significantly prejudiced without a trial continuance because the COVID-19 pandemic hindered his new counsel’s ability to conduct discovery. (Reply, 3-4.) Thropay submits a declaration from Stone in support of his reply.

Stone attests that the COVID-19 pandemic has hindered Thropay’s ability to conduct discovery because, for example, Thropay requires that “multiple witnesses from the Securities and Exchange Commission (hereinafter, “SEC”) appear at trial to testify on his behalf.” (Stone Decl. ¶ 6.) According to Stone, all employees from the SEC’s Los Angeles office are still working remotely and thus, subpoenas cannot be served on the SEC’s Los Angeles office. (Id.) Additionally, Stone attests that his office has served a Freedom of Information Act (“FOIA”) request to United States Citizenship and Immigration Services (“USCIS”) regarding Plaintiffs’ immigration status. (Stone Decl. ¶ 7.) According to Stone, his office anticipates a response to the FOIA request within the next three to four months. (Id.)

The court finds that good cause exists to continue trial in this matter. Based on Thropay’s moving and reply papers, Thropay has demonstrated that he has been unable to obtain discovery despite diligent efforts because obtaining certain discovery has been significantly hindered due to current counsel substituting into this matter in January 2021 and the COVID-19 pandemic. Additionally, Plaintiffs do not oppose Thropay’s request for a trial continuance.

For these reasons, Thropay’s motion is granted.

Conclusion

Thropay’s motion is granted. Trial is continued to August 2, 2022, at 10:a.m. in this department. The Final Status Conference is continued to July 26, 2022, at 8:30 a.m. in this department. Plaintiff is ordered to file a motion for class certification to be heard in the next 90 days. The failure to do so may result in an order striking the class allegations. All cut-off dates based on the trial date are not continued. Thropay is to give notice.

"


Case Number: ****2775    Hearing Date: May 12, 2021    Dept: 37

HEARING DATE: May 12, 2021

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Defendant, Rachel H. Lew

OPPOSING PARTIES: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: July 27, 2021

PROOF OF SERVICE: OK

MOTION: Defendant’s Motion for Judgment on the Pleadings

OPPOSITION: April 29, 2021

REPLY: May 5, 2021

TENTATIVE: Lew’s motion is denied without prejudice to renewing it if the Supreme Court affirms the ruling prohibiting applying Penal Code section 496(c) to fraud claims. Lew is to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program.  Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”).  Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rotenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”). 

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. 

On August 27, 2020, Plaintiffs filed their operative Fourth Amended Complaint. (“4AC”) The 4AC alleges the same four causes of action as the FAC.

On January 11, 2021, the court sustained Defendant Miller Mayer’s demurrer to the 4AC’s class action allegations and fourth cause of action, without leave to amend.

Lew now moves for judgment on the pleadings as to the 4AC’s fourth cause of action against Lew. Plaintiff opposes the motion.

Discussion

  1. Meet and Confer Efforts

 

As of January 1, 2018, a party filing a MJOP must meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion, identifying all of the specific allegations that it believes are subject to be stricken and, with legal support, the basis of the deficiencies.  (Code Civ. Proc., ; 439, subd. (a)(1).)  “The parties shall meet and confer at least five days before the date a motion for judgment on the pleadings is filed.  If the parties are unable to meet and confer by that time, the moving party shall be granted an automatic 30-day extension of time within which to file a motion for judgment on the pleadings, by filing and serving, on or before the date a motion for judgment on the pleadings must be filed, 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., ; 439, subd. (a)(2).)   

Lew submits the declaration of her counsel, M. Candice Bryner (“Bryner”) in support of the instant motion. Bryner attests that between February 27 and March 18, 2021, she had multiple communications with Plaintiff’s counsel Steven Scandura (“Scandura”) regarding the basis for the instant motion. (Bryner Decl. ¶ 2, Exh. 1.) Specifically, Bryner attests that despite inviting Scandura to meet and confer by telephone, Scandura responded to these communications by email. (Id.)

The Bryner Declaration is sufficient for purposes of Code of Civil Procedure section 439.

  1. Legal Authority

 

A defendant may move for judgment on the pleadings if the complaint does not state facts sufficient to constitute a cause of action against the defendant.  (Code Civ. Proc., ; 438, subds. (b)(1) & (c)(1)(B)(ii).)  Except as provided by statute, the rules governing demurrers govern motions for judgment on the pleadings.  (Cloud v. Northrup Grumman Corp. (1998) 67 Cal.App.4th 995, 999.)  Therefore, the grounds for a motion for judgment on the pleadings must be apparent from either the face of the complaint or a matter of which the court may take judicial notice.  (Ibid.)  The court accepts the truth of all material facts properly pleaded, but not the truth of “contentions, deductions or conclusions of law.”  (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) 

  1. Analysis

Penal Code section 496, subdivision (a) provides as follows: “Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.” Further, Penal Code section 496, subdivision (c) provides that any person who has been injured by a violation of subdivision (a) may bring an action for treble damages, attorney’s fees and costs.

Lew contends that judgment on the fourth cause of action is required because funds procured via fraud or breach of a duty is not “stolen property” within the meaning of Penal Code section 496. (Motion, 9-15.) Additionally, Lew contends that her previous MSJ does not bar the present motion because the grounds for this motion were not raised in the MSJ and additionally, failure to attack the pleadings in the MSJ does not preclude an MJOP. (Motion, 16-17.) Lew relies on Siry Inv., L.P. v. Farkhondehpour (2020) 45 Cal. App 5th 1098 (Siry) in support of the instant motion.

In Siry, individuals formed a partnership to renovate commercial property in Los Angeles. (Id. at 1109.) Subsequently, one of the partners sued the other partner and other entities involved in the renovation project, alleging underpayment and improper diversion of the partnership’ rental income. (Id. at 1110.) The action proceed to trial, a verdict was reached, and then the Court of Appeal reversed the jury’s verdict to defects on the special verdict form. (Id. at 1111.) Terminating sanctions and a default judgment were entered against defendants thereafter and defendants challenged both orders. (Id. at 1111-1112.) In examining whether the plaintiff was entitled to obtain treble damages pursuant to Penal Code section 496, the Court of Appeal held that treble damages were not available in cases where “plaintiff merely alleges and proves conduct involving fraud, misrepresentation, conversion, or some other type of theft that does not involve “stolen” property.” (Id. at 1134.) The Court of Appeal reasoned that treble damages under Penal Code section 496 are not available in these situations because permitting treble damages would effectively repeal punitive damages statutes and would eclipse the traditional damages for these causes of action. (Id. at 1135-1138.)

The California Supreme Court granted review on Siry on July 8, 2020. Pursuant to California Rules of Court, Rule 8.115, subdivision (e), “Pending review and filing of the Supreme Court's opinion, unless otherwise ordered by the Supreme Court under (3), a published opinion of a Court of Appeal in the matter has no binding or precedential effect and may be cited for potentially persuasive value only.” Thus, Siry constitutes persuasive authority.

In opposition, Plaintiffs contend that Lew’s motion should be denied because it is premature given the Supreme Court’s pending review on Siry. (Opposition, 3.) As such, Plaintiffs contend that Bell v. Feibush (2013) 212 Cal.App.4th 1041 (Bell) is still controlling and requires denial of this motion.

In Bell, a default judgment was entered against an individual for breach of contract, fraud and treble damages under Penal Code section 496(c). (Id. at 1043.) The individual challenged the treble damages award on the grounds he was never convicted in a criminal proceeding. (Id.) The Court of Appeal held that a conviction is not required to recover treble damages under Penal Code section 496(c). (Id. at 1044-1047.) Additionally, the Court of Appeal held that Penal Code section 496(c) includes theft by false pretense. (Id.at 1043.) Specifically, the evidence presented at the default prove-up hearing in this action demonstrated that the individual induced another to loan him money under the false pretense that he owned a certain trademark. (Id.)

In reply, Lew argues that even if Siry is not binding authority, other courts have already concluded similarly to Siry that Penal Code section 496(c) does not apply to funds procured via fraud or breach of a duty. (Reply, 2-4.) Lew cites to cases, including Lacagnina v. Comprehend Systems, Inc. (2018) 25 Cal. App. 5th 955 (Lacagnina) in support of her argument.

In Lacagnina, the Court of Appeal rejected the contention that an employee who recovers a judgment for lost compensation has suffered a “theft” of “labor” for which he or she is entitled to treble damages under Penal Code section 496(c). (Id. at 958.) In reaching this conclusion, the Lacagnina court concluded that “labor” did not constitute property that can be stolen. (Id. at 967-970.) Additionally, the Lacagnina court concluded that Plaintiff’s labor was not stolen, as Plaintiff received compensation for his labor but had a dispute about commissions and other terms due upon his termination. (Id. at 970-971.)

Thus, Lacagnina does not support Lew’s arguments, as it deals with a dispute about whether “labor” constitutes stolen property for purposes of Penal Code section 496(c). There is no issue of allegedly stolen labor in this action.

The court is persuaded by the court’s reasoning in Siry. The court finds the Siry court’s discussion of the legislative intent behind Penal Code section 496(c) persuasive that allowing treble damages for causes of action such as fraud, misrepresentation or conversion under Penal Code section 496(c) would be improper because it would undercut the existing remedies for these causes of action and the existing punitive damage statutes. However, Siry only constitutes persuasive authority. The court believes it is bound to follow Bell until the Supreme Court issues a different ruling in Siry. The court notes that Penal Code section 496(c) is one of the issues on which review was granted.

For these reasons, Lew’s motion is denied without prejudice to renewing it if the Supreme Court affirms the ruling prohibiting applying Penal Code section 496(c) to fraud claims.

Conclusion

Lew’s motion is denied without prejudice to renewing it if the Supreme Court affirms the ruling prohibiting applying Penal Code section 496(c) to fraud claims Lew is to give notice.



Case Number: ****2775    Hearing Date: January 11, 2021    Dept: 37

HEARING DATE: January 11, 2021

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Defendant, Miller Mayer LLP

OPPOSING PARTIES: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: July 27, 2021

PROOF OF SERVICE: OK

MOTION: Defendant’s Demurrer to the Fourth Amended Complaint; Motion to Strike Portions of Fourth Amended Complaint

OPPOSITION: December 28, 2020

REPLY: January 4, 2021

TENTATIVE: Miller Mayer’s demurrer is sustained, without leave to amend. Miller Mayer is to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program.  Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”).  Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rotenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”). 

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. The FAC named Moving Defendant Miller Mayer, LLP (“Miller Mayer”) as well as several new defendants.

On February 22, 2018 Miller Mayer filed a special motion to strike (“anti-SLAPP motion”). Miller Mayer’s anti-SLAPP motion was granted in its entirety on May 2, 2018. Plaintiffs appealed this May 2, 2018 order and on October 29, 2019 the Court of Appeal ruled in Plaintiffs’ favor, reversing the May 2, 2018 order.

Plaintiffs filed Third Amended Complaint (“TAC”) on July 15, 2019 during the pendency of Plaintiffs’ appeal of the May 2, 2018 order. The TAC alleges the same four causes of action against Miller Mayer.

On July 28, 2020, Miller Mayer’s demurrer to the TAC was sustained. On August 27, 2020, Plaintiffs filed their operative Fourth Amended Complaint. (“4AC”) The 4AC alleges the same four causes of action.

Miller Mayer now demurs to the 4AC as follows:

  1. The 4AC fails to state facts sufficient to establish commonality in order to sustain class action treatment;

  2. The Fourth Cause of Action for Recovery Under Penal Code ;496(c) fails to state facts sufficient to state a cause of action against Miller Mayer.

    (Notice of Motion, 2.) Plaintiff opposes both motions.

    Request for Judicial Notice

    Miller Mayer requests that the court take judicial notice of the following in support of its demurrer and motion to strike:

  1. November 6, 2019 tentative ruling granting Lew’s demurrer to the TAC (Exhibit 1);

  2. November 7, 2019 Notice of Ruling regarding Wolfsdorf Rosenthal LLP and Lew’s demurrers to the TAC (Exhibit 2).

    Miller Mayer’s request is granted. The existence and legal significance of these documents are judicially noticeable. (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.)

  2. Analysis

  1. Class Action Allegations

The Supreme Court has recognized that courts may dispose of class actions on demurrer.  (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440; Tucker v. Pacific Bell Mobile Servs. (2012) 208 Cal.App.4th 201, 215 [“Where a complaint, on its face, fails to allege facts sufficient to establish a community of interest as to the elements of the class claims, it would be a waste of time and judicial resources to require a full evidentiary hearing when the matter can properly be disposed of by demurrer.”].)   

Code of Civil Procedure section 382 authorizes class actions ‘when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .’  The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members.  [Citations.]  The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.  [Citation.] 

(Sav-On Drug Stores, Inc. v. Sup. Ct. (2004) 34 Cal.4th 319, 326.)  “Class actions will not be permitted, for example, where there are diverse factual issues to be resolved, even though there may be many common questions of law.”  (Brown v. Regents of Univ. of Cal. (1984) 151 Cal.App.3d 982, 988-989.)  A sufficient community of interests does not exist where claims involve factual questions that can only be resolved by individual proof, such as whether a particular class member relied upon an allegedly fraudulent representation.  (Brownid. at p. 989.)   

Miller Mayer contends that Plaintiff’s 4AC still fails to satisfy the commonality requirement to plead class action allegations against it. (Demurrer, 4-7.) Specifically, Miller Mayer contends that the 4AC cannot plead commonality when “claims involve factual questions that can only be resolved by individual proof.” (Demurrer, 4, citing Brown, supra, 151 Cal.App.3d 982.) Based on this, Miller Mayer contends that the 4AC is deficient because it alleges on its face that the Pacific Proton Project was marketed to different investors over 3 years and does not allege that each investor received the same information such that commonality would apply. (Demurrer, 6-7.)

In Brown, the plaintiffs alleged the defendants engaged in common law fraud, among other claims, by making representations regarding the level of medical care at a medical center and the medical center’s failure to provide adequate coronary care.  (Brown, supra, 151 Cal.App.3d at 986.)  The Brown plaintiffs argued that the case had commonality because each plaintiff or their family was induced to receive coronary care at the medical center by certain misrepresentations. (Id. at 989.) However, the Court of Appeal recognized that factual differences in the means by which the purported misrepresentations were communicated and the proximate cause of any plaintiff’s damage to their reliance on the misrepresentations presents a “quagmire of tough factual questions which can only be resolved by individual proof.”  (Id.) For example, the Court of Appeal noted that each potential class member’s medical condition and method treatment must be examined to determine whether and to what extent the damage they claimed to have suffered is related to the misrepresentations allegedly communicated. (Id.

In opposition, Plaintiffs contend that they are “entitled to a reference” that each member of the class relied on Defendants’ alleged misrepresentations. (Opposition, 15-16.) Additionally, Plaintiffs contend that the 4AC is sufficiently pled because “differences in the nature of the misrepresentations are immaterial when everything was a fraud.” (Opposition, 16-19.) According to Plaintiff, it is immaterial whether there are differences between what one investor was told versus another investor “since the POM is itself fraudulent through and through.” (Opposition, 17.) However, Plaintiffs cite no authority in support of their arguments that they are entitled to such a reference or that differences in the misrepresentations made to different investors are immaterial.

Here, the 4AC alleges that from October 2014 through April 2016, each class Plaintiff was presented with a “sales pitch” to invest in the Pacific Proton Project and were told general things about the Project, including that it was a “legitimate medical infrastructure project.” (4AC ¶ 33.) Additionally, each investor was allegedly presented with “an array of professionals” who “lent their credibility” to the Pacific Proton Project. (4AC, ¶ 34.) Additionally, the 4AC alleges at various points that all class Plaintiffs were recruited with documents created by Miller Mayer. (see, e.g., 4AC ¶ 5(a), (b).) Plaintiffs allege that all class plaintiffs all received “essentially” the same proposal and “same or nearly identical” sham escrow agreement allegedly prepared by Miller Mayer. (4AC ¶ 7.) Finally, the class plaintiffs were allegedly solicited “individually or in large groups” either “in person or at seminars” held in “various cities in China. (4AC, ¶ 8.)

The court agrees with Miller Mayer that the 4AC still fails to plead facts to demonstrate commonality. As discussed above, the 4AC’s allegations concerning the class plaintiffs still fail to establish commonality, other than statements to this effect. Specifically, the 4AC’s allegations fail to plead commonality because it only pleads facts regarding representations made to the class plaintiffs generally, including that they were told that the Pacific Proton Project was a “legitimate” project. However, the 4AC also alleges that these representations took place over more than two years, “individually or in large groups,” in various cities, and were only “essentially” the same. Based on these allegations, the court finds the 4AC similar to the complaint described in Brown, in that the 4AC concerns questions which can only be resolved by “individual proof.” Such allegations are insufficient to establish commonality for purposes of allegations class action claims.

For these reasons, Miller Mayer’s demurrer is sustained as to the 4AC’s class action allegations.

  1. Fourth Cause of Action: Penal Code 496(c)

Penal Code section 496, subdivision (a) provides as follows: “Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.” Further, Penal Code section 496, subdivision (c) provides that any person who has been injured by a violation of subdivision (a) may bring an action for treble damages, attorney’s fees and costs.

Miller Mayer contends that Plaintiffs’ fourth cause of action remains insufficiently pled because the fourth cause of action fails to allege what property, if any, Miller Mayer stole or received, knowing that it was stolen. (Demurrer, 7-8.) Additionally, Miller Mayer contends that its demurrer to the fourth cause of action must now be sustained without leave to amend due to Plaintiffs’ continued failure to adequately plead a cause of action under Penal Code section 496, subdivision (c) (Id.)

Plaintiffs’ opposition does not address Miller Mayer’s argument as to the fourth cause of action. Instead, Plaintiffs contend that the fourth cause of action of the 4AC “does not apply to defendant Miller Mayer.” (Opposition, 5.)

In reply, Miller Mayer contends that its demurrer to the fourth cause of action must be sustained without leave to amend because Plaintiffs’ opposition demonstrates that they have abandoned their claim under Penal Code section 496, subdivision (c).

The 4AC’s fourth cause of action indicates that it is: “Against all Defendants except Defendants MILLER MAYER AND WOLFSDORF ROSENTHAL, which has been stricken from this cause of action by the Court.” However, the fourth cause of action still includes factual allegations pertaining to Miller Mayer. For example, 4AC alleges that Defendants, including Miller Mayer “must have been painfully aware” that Liu and Wang were scamming Plaintiffs. (4AC, ¶ 85.)

The court agrees with Miller Mayer. Although Plaintiffs contend that the 4AC’s fourth cause of action does not apply to Miller Mayer, the factual allegations supporting the fourth cause of action still pertain to Miller Mayer. Additionally, Plaintiffs do not oppose Miller Mayer’s argument that the fourth cause of action is insufficiently pled because the 4AC does not plead that Miller Mayer stole property or received property knowing that it was stolen. Thus, the fourth cause of action is insufficiently pled as to Miller Mayer.

For these reasons, Miller Mayer’s demurrer is sustained.

Conclusion

Miller Mayer’s demurrer is sustained, without leave to amend. Miller Mayer is to give notice.


[1] Miller Mayer submits the declaration of its attorney, Jennifer Newcomb (“Newcomb”) to demonstrate that it has fulfilled its statutory meet and confer obligations prior to bringing the instant demurrer. Newcomb attests that on September 21, 2020, she sent Plaintiffs’ counsel a meet and confer letter outlining the arguments raised in the instant motion but that Plaintiffs’ counsel never responded. (Newcomb Decl., ¶ 3, Ex. A.) While the court ordinarily expects the parties to meet and confer telephonically prior to filing a demurrer or motion to strike, the court finds that in this instance, the Newcomb Declaration is sufficient for purposes of Code of Civil Procedure, section 430.41.



Case Number: ****2775    Hearing Date: January 09, 2021    Dept: 37

HEARING DATE: January 11, 2021

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Defendant, Miller Mayer LLP

OPPOSING PARTIES: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: July 27, 2021

PROOF OF SERVICE: OK

MOTION: Defendant’s Demurrer to the Fourth Amended Complaint; Motion to Strike Portions of Fourth Amended Complaint

OPPOSITION: December 28, 2020

REPLY: January 4, 2021

TENTATIVE: Miller Mayer’s demurrer is sustained, without leave to amend. Miller Mayer is to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program.  Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”).  Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rotenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”). 

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. The FAC named Moving Defendant Miller Mayer, LLP (“Miller Mayer”) as well as several new defendants.

On February 22, 2018 Miller Mayer filed a special motion to strike (“anti-SLAPP motion”). Miller Mayer’s anti-SLAPP motion was granted in its entirety on May 2, 2018. Plaintiffs appealed this May 2, 2018 order and on October 29, 2019 the Court of Appeal ruled in Plaintiffs’ favor, reversing the May 2, 2018 order.

Plaintiffs filed Third Amended Complaint (“TAC”) on July 15, 2019 during the pendency of Plaintiffs’ appeal of the May 2, 2018 order. The TAC alleges the same four causes of action against Miller Mayer.

On July 28, 2020, Miller Mayer’s demurrer to the TAC was sustained. On August 27, 2020, Plaintiffs filed their operative Fourth Amended Complaint. (“4AC”) The 4AC alleges the same four causes of action.

Miller Mayer now demurs to the 4AC as follows:

  1. The 4AC fails to state facts sufficient to establish commonality in order to sustain class action treatment;

  2. The Fourth Cause of Action for Recovery Under Penal Code ;496(c) fails to state facts sufficient to state a cause of action against Miller Mayer.

    (Notice of Motion, 2.) Plaintiff opposes both motions.

    Request for Judicial Notice

    Miller Mayer requests that the court take judicial notice of the following in support of its demurrer and motion to strike:

  1. November 6, 2019 tentative ruling granting Lew’s demurrer to the TAC (Exhibit 1);

  2. November 7, 2019 Notice of Ruling regarding Wolfsdorf Rosenthal LLP and Lew’s demurrers to the TAC (Exhibit 2).

    Miller Mayer’s request is granted. The existence and legal significance of these documents are judicially noticeable. (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.)

  2. Analysis

  1. Class Action Allegations

The Supreme Court has recognized that courts may dispose of class actions on demurrer.  (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440; Tucker v. Pacific Bell Mobile Servs. (2012) 208 Cal.App.4th 201, 215 [“Where a complaint, on its face, fails to allege facts sufficient to establish a community of interest as to the elements of the class claims, it would be a waste of time and judicial resources to require a full evidentiary hearing when the matter can properly be disposed of by demurrer.”].)   

Code of Civil Procedure section 382 authorizes class actions ‘when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .’  The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members.  [Citations.]  The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.  [Citation.] 

(Sav-On Drug Stores, Inc. v. Sup. Ct. (2004) 34 Cal.4th 319, 326.)  “Class actions will not be permitted, for example, where there are diverse factual issues to be resolved, even though there may be many common questions of law.”  (Brown v. Regents of Univ. of Cal. (1984) 151 Cal.App.3d 982, 988-989.)  A sufficient community of interests does not exist where claims involve factual questions that can only be resolved by individual proof, such as whether a particular class member relied upon an allegedly fraudulent representation.  (Brownid. at p. 989.)   

Miller Mayer contends that Plaintiff’s 4AC still fails to satisfy the commonality requirement to plead class action allegations against it. (Demurrer, 4-7.) Specifically, Miller Mayer contends that the 4AC cannot plead commonality when “claims involve factual questions that can only be resolved by individual proof.” (Demurrer, 4, citing Brown, supra, 151 Cal.App.3d 982.) Based on this, Miller Mayer contends that the 4AC is deficient because it alleges on its face that the Pacific Proton Project was marketed to different investors over 3 years and does not allege that each investor received the same information such that commonality would apply. (Demurrer, 6-7.)

In Brown, the plaintiffs alleged the defendants engaged in common law fraud, among other claims, by making representations regarding the level of medical care at a medical center and the medical center’s failure to provide adequate coronary care.  (Brown, supra, 151 Cal.App.3d at 986.)  The Brown plaintiffs argued that the case had commonality because each plaintiff or their family was induced to receive coronary care at the medical center by certain misrepresentations. (Id. at 989.) However, the Court of Appeal recognized that factual differences in the means by which the purported misrepresentations were communicated and the proximate cause of any plaintiff’s damage to their reliance on the misrepresentations presents a “quagmire of tough factual questions which can only be resolved by individual proof.”  (Id.) For example, the Court of Appeal noted that each potential class member’s medical condition and method treatment must be examined to determine whether and to what extent the damage they claimed to have suffered is related to the misrepresentations allegedly communicated. (Id.

In opposition, Plaintiffs contend that they are “entitled to a reference” that each member of the class relied on Defendants’ alleged misrepresentations. (Opposition, 15-16.) Additionally, Plaintiffs contend that the 4AC is sufficiently pled because “differences in the nature of the misrepresentations are immaterial when everything was a fraud.” (Opposition, 16-19.) According to Plaintiff, it is immaterial whether there are differences between what one investor was told versus another investor “since the POM is itself fraudulent through and through.” (Opposition, 17.) However, Plaintiffs cite no authority in support of their arguments that they are entitled to such a reference or that differences in the misrepresentations made to different investors are immaterial.

Here, the 4AC alleges that from October 2014 through April 2016, each class Plaintiff was presented with a “sales pitch” to invest in the Pacific Proton Project and were told general things about the Project, including that it was a “legitimate medical infrastructure project.” (4AC ¶ 33.) Additionally, each investor was allegedly presented with “an array of professionals” who “lent their credibility” to the Pacific Proton Project. (4AC, ¶ 34.) Additionally, the 4AC alleges at various points that all class Plaintiffs were recruited with documents created by Miller Mayer. (see, e.g., 4AC ¶ 5(a), (b).) Plaintiffs allege that all class plaintiffs all received “essentially” the same proposal and “same or nearly identical” sham escrow agreement allegedly prepared by Miller Mayer. (4AC ¶ 7.) Finally, the class plaintiffs were allegedly solicited “individually or in large groups” either “in person or at seminars” held in “various cities in China. (4AC, ¶ 8.)

The court agrees with Miller Mayer that the 4AC still fails to plead facts to demonstrate commonality. As discussed above, the 4AC’s allegations concerning the class plaintiffs still fail to establish commonality, other than statements to this effect. Specifically, the 4AC’s allegations fail to plead commonality because it only pleads facts regarding representations made to the class plaintiffs generally, including that they were told that the Pacific Proton Project was a “legitimate” project. However, the 4AC also alleges that these representations took place over more than two years, “individually or in large groups,” in various cities, and were only “essentially” the same. Based on these allegations, the court finds the 4AC similar to the complaint described in Brown, in that the 4AC concerns questions which can only be resolved by “individual proof.” Such allegations are insufficient to establish commonality for purposes of allegations class action claims.

For these reasons, Miller Mayer’s demurrer is sustained as to the 4AC’s class action allegations.

  1. Fourth Cause of Action: Penal Code 496(c)

Penal Code section 496, subdivision (a) provides as follows: “Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.” Further, Penal Code section 496, subdivision (c) provides that any person who has been injured by a violation of subdivision (a) may bring an action for treble damages, attorney’s fees and costs.

Miller Mayer contends that Plaintiffs’ fourth cause of action remains insufficiently pled because the fourth cause of action fails to allege what property, if any, Miller Mayer stole or received, knowing that it was stolen. (Demurrer, 7-8.) Additionally, Miller Mayer contends that its demurrer to the fourth cause of action must now be sustained without leave to amend due to Plaintiffs’ continued failure to adequately plead a cause of action under Penal Code section 496, subdivision (c) (Id.)

Plaintiffs’ opposition does not address Miller Mayer’s argument as to the fourth cause of action. Instead, Plaintiffs contend that the fourth cause of action of the 4AC “does not apply to defendant Miller Mayer.” (Opposition, 5.)

In reply, Miller Mayer contends that its demurrer to the fourth cause of action must be sustained without leave to amend because Plaintiffs’ opposition demonstrates that they have abandoned their claim under Penal Code section 496, subdivision (c).

The 4AC’s fourth cause of action indicates that it is: “Against all Defendants except Defendants MILLER MAYER AND WOLFSDORF ROSENTHAL, which has been stricken from this cause of action by the Court.” However, the fourth cause of action still includes factual allegations pertaining to Miller Mayer. For example, 4AC alleges that Defendants, including Miller Mayer “must have been painfully aware” that Liu and Wang were scamming Plaintiffs. (4AC, ¶ 85.)

The court agrees with Miller Mayer. Although Plaintiffs contend that the 4AC’s fourth cause of action does not apply to Miller Mayer, the factual allegations supporting the fourth cause of action still pertain to Miller Mayer. Additionally, Plaintiffs do not oppose Miller Mayer’s argument that the fourth cause of action is insufficiently pled because the 4AC does not plead that Miller Mayer stole property or received property knowing that it was stolen. Thus, the fourth cause of action is insufficiently pled as to Miller Mayer.

For these reasons, Miller Mayer’s demurrer is sustained.

Conclusion

Miller Mayer’s demurrer is sustained, without leave to amend. Miller Mayer is to give notice.


[1] Miller Mayer submits the declaration of its attorney, Jennifer Newcomb (“Newcomb”) to demonstrate that it has fulfilled its statutory meet and confer obligations prior to bringing the instant demurrer. Newcomb attests that on September 21, 2020, she sent Plaintiffs’ counsel a meet and confer letter outlining the arguments raised in the instant motion but that Plaintiffs’ counsel never responded. (Newcomb Decl., ¶ 3, Ex. A.) While the court ordinarily expects the parties to meet and confer telephonically prior to filing a demurrer or motion to strike, the court finds that in this instance, the Newcomb Declaration is sufficient for purposes of Code of Civil Procedure, section 430.41.



Case Number: ****2775    Hearing Date: August 20, 2020    Dept: 37

HEARING DATE: August 20, 2020

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Judgment Creditor Wolfsdorf Rosenthal LLP

OPPOSING PARTY: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: July 27, 2021

PROOF OF SERVICE: OK

MOTION: Motion for Order to Show Cause Regarding Contempt Against Plaintiffs

OPPOSITION: August 6, 2020

REPLY: None as of August 18, 2020

TENTATIVE: Wolfsdorf Rosenthal’s motion for order to show cause re contempt is DENIED. Wolfsdorf Rosenthal to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program.  Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”).  Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal”), erroneously sued as Wolfsdorf Rothenthal LLP, Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”). 

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. The FAC named Moving Defendant Miller Mayer, LLP (“Miller Mayer”) as well as several new defendants.

On February 22, 2018 Miller Mayer filed a special motion to strike (“anti-SLAPP motion”). Miller Mayer’s anti-SLAPP motion was granted in its entirety on May 2, 2018. Plaintiffs appealed this May 2, 2018 order and on October 29, 2019 the Court of Appeal ruled in Plaintiffs’ favor, reversing the May 2, 2018 order. The Court of Appeal’s October 29, 2019 order explicitly stated that it only considered whether Miller Mayer’s activity constituted protected activity for purposes of the anti-SLAPP statute and further, stated that it did not consider the merits of Plaintiffs’ allegations against Miller Mayer.

Plaintiffs filed the now operative Third Amended Complaint (“TAC”) on July 15, 2019 during the pendency of Plaintiffs’ appeal of the May 2, 2018 order. The TAC alleges the same four causes of action against each Defendant.

On November 27, 2019, the court granted Wolfsdorf Rosenthal’s motion to Compel Responses to Special Interrogatories, Set One from Plaintiffs. Plaintiffs were ordered to provide responses without objection within 20 days and to pay sanctions of $1,000 to Wolfsdorf Rosenthal.

On March 16, 2020, Wolfsdorf Rosenthal filed the instant Motion for Order to Show Cause re Contempt against Plaintiffs. Wolsdorf Rosenthal motion argues that Plaintiffs should be held in contempt for failure to obey the court’s November 27, 2019 Order and that Plaintiffs should be ordered to pay Wolfsdorf Rosenthal’s attorney’s fees incurred in connection with this motion.

Discussion

Code of Civil Procedure, section 128(a)(4) provide that every court shall have the power to compel obedience of its judgments, orders, and process. Code of Civil Procedure, section 1209(a)(5) provides that disobedience of any lawful order constitutes contempt of the authority of the Court. Per Code of Civil Procedure, section 1211(a), when this contempt is not committed in the presence of the Court, an affidavit “shall be presented to the court or judge of the facts constituting the contempt.” Further, Code of Civil Procedure, section 1218(a) provides that the court, upon answer and evidence taken, shall determine if the party is guilty of contempt, and may impose a fine not exceeding $1,000, payable to the Court. The elements necessary to show contempt are: (1) the making of the order, (2) knowledge of the order, (3) ability of the accused to render compliance, and (4) willful disobedience of the order. (Conn v. Superior Court (1987) 196 Cal.App.3d 774, 784.)

The party seeking to charge another with contempt must complete service of the affidavit provided for in Code of Civil Procedure, section 1211(a) through personal service. (Koehler v. Superior Court (2010) 181 Cal.App.4th 1153, 1169.)

Wolfsdorf Rosenthal argues that Plaintiffs should be held in contempt because Plaintiffs knew of the court’s November 27, 2019 Order requiring them to serve responses to Special Interrogatories, Set One without objection and pay sanctions, and that Plaintiffs willfully disobeyed this order by failing to serve responses or pay sanctions as of the filing of this motion. (Motion, 4-5.)

On August 6, 2020, Plaintiffs filed their opposition to the instant motion. Plaintiffs’ opposition argues that an order to show cause re contempt is not warranted because Plaintiffs have complied with the November 27, 2019 Order by serving responses without objection and by paying sanctions. (Opposition, 1; Declaration of Steven P. Scandura, ¶¶ 2-3, Exhibits A-B.) However, it appears the discovery responses were served on August 6, 2020, which is much later than the date required by the Order. Also, the answers from Plaintiff Lu have a verification dated April 8, 2019 that is not signed by Lu. Finally, the Scandura Declaration purports to have two Exhibits B. The second one is purportedly a wire transfer record paying the sanctions, but the Scandura Declaration, Exhibit B does not contain a copy of any wire transfer records regarding the sanctions to be paid.

Further, Plaintiffs contend that Wolfsdorf Rosenthal’s motion must be denied because the contempt motion was not served personally. Plaintiff’s counsel Steven P. Scandura attests that he has searched his records and has found no record that the contempt motion was personally served. (Scandura Decl. ¶ 4.) Further, Scandura attests that he does not believe his clients were personally served. (Id.) Scandura also attests that he is informed that Plaintiff Lu has not been in the United States since the interrogatories at issue were originally served and that he is informed and believes Plaintiff Lu cannot verify responses under penalty or perjury “because he is in China where to do so would be illegal under Chinese law.” (Scandura Decl. ¶ 5.)

Contrary to their assertions, Plaintiffs have not demonstrated that they have fully complied with the court’s November 27, 2019 order.

However, moving party has not shown personal service on Plaintiffs of this motion or the order on which it is based.

Wolfsdorf Rosenthal’s motion for an order to show cause re contempt is DENIED.

Conclusion

Wolfsdorf Rosenthal’s motion for order to show cause re contempt is DENIED. Wolfsdorf Rosenthal to give notice.



Case Number: ****2775    Hearing Date: July 28, 2020    Dept: 37

HEARING DATE: July 28, 2020

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi and Jun Lu v. Rachel H. Lew, et al.

MOVING PARTY: Defendant, Miller Mayer LLP

OPPOSING PARTY: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: September 29, 2020

PROOF OF SERVICE: OK

MOTION: Defendant’s Demurrer to the Third Amended Complaint; Motion to Strike Portions of Third Amended Complaint

OPPOSITION: July 13, 2020

REPLY: July 21, 2020

TENTATIVE: Miller Mayer’s demurrer to the TAC is sustained. Plaintiffs are given 20 days leave to amend from this date. Miller Mayer is to give notice.

Background

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program.  Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”).  Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rosenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”). 

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. The FAC named Moving Defendant Miller Mayer, LLP (“Miller Mayer”) as well as several new defendants.

On February 22, 2018 Miller Mayer filed a special motion to strike (“anti-SLAPP motion”). Miller Mayer’s anti-SLAPP motion was granted in its entirety on May 2, 2018. Plaintiffs appealed this May 2, 2018 order and on October 29, 2019 the Court of Appeal ruled in Plaintiffs’ favor, reversing the May 2, 2018 order. The Court of Appeal’s October 29, 2019 order explicitly stated that it only considered whether Miller Mayer’s activity constituted protected activity for purposes of the anti-SLAPP statute and further, stated that it did not consider the merits of Plaintiffs’ allegations against Miller Mayer.

Plaintiffs filed the now operative Third Amended Complaint (“TAC”) on July 15, 2019 during the pendency of Plaintiffs’ appeal of the May 2, 2018 order. The TAC alleges the same four causes of action against Miller Mayer.

Miller Mayer now demurrers to the first, third and fourth causes of action of the TAC and additionally moves to strike portions of the TAC. Plaintiff opposes both motions.

Request for Judicial Notice

Miller Mayer requests that the court take judicial notice of all of the following:

  1. October 29, 2019 opinion by the Court of Appeal in the matter Zhao Hui Shi v. Wolfsdorf Rosenthal, LLP et al., Case No. B290792 (Exhibit 1);

  2. November 6, 2019 tentative ruling by this court granting Defendant Rachel H. Lew’s demurrer to the TAC (Exhibit 2);

  3. November 7, 2019 Notice of Ruling regarding Demurrers by Wolfsdorf Rosenthal and Lew (Exhibit 3).

Miller Mayer’s request is granted. The existence and legal significance of these documents are judicially noticeable. (Evidence Code ; 452, subds. (d), (h).)

Discussion[1]

  1. 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.)

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. First Cause of Action: Fraud

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.)

Miller Mayer contends that the TAC’s still fails to plead sufficient facts to allege a cause of action for fraud against it because the TAC fails to plead fraud by Miller Mayer with specificity. (Demurrer 11-12.) Specifically, Miller Mayer contends the TAC fails to allege how, what when, where, to whom and by what means Miller Mayer made allegedly fraudulent representations. (Id.)

In opposition, Plaintiffs contend that the TAC sufficiently alleges fraud against Miller Mayer because Miller Mayer “created a complete investment scam for Liu out of whole cloth” by creating the Escrow Agreement and Private Offering Memorandum (“POM”) which all Defendants used to defraud all investors in this action. (Opposition, 6-12.) Plaintiffs further appear to argue that Miller Mayer’s fraudulent actions in connection with all Defendants’ investment conspiracy are self-evident, and that the TAC’s paragraphs 26 to 46 sufficiently allege a cause of action for fraud. (Id.)

Here, the TAC alleges that Defendants conspired with Liu and Wang to “defraud numerous investors of their money” in that Liu and Wang used “Defendant Thropay and the other Defendant professionals and the other Defendant professionals to give credibility to the project, who did so willingly and with full knowledge of adverse facts.” (TAC ¶ 51.) Further, the POM was “essentially fraudulent,” and all “professional defendants” continued to assist Liu and Wang after the initial investment by “maintain[ing] the appearance of a legitimate project.” (TAC ¶¶ 51, 53.) The TAC also alleges that Plaintiffs relied on the POM to their detriment, and that all Defendants “must have been painfully aware that Liu and Wang were scamming Plaintiffs” because the investment project “was an obvious façade.” (TAC ¶ 56.) Finally, the TAC alleges that each of the defendants “provided material assistance” by “drafting the documents and petitions” needed to consummate the fraud. (Id.)

The court finds that the TAC’s first cause of action is insufficiently pled as to Miller Mayer. As discussed above, the TAC fails to differentiate between which Defendant engaged in which action in furtherance of Defendants’ allegedly fraudulent investment scheme. Instead, the TAC repeatedly alleges that all Defendants were involved in the investment scheme by “provid[ing] material assistance” or “drafting documents and petitions.” As such, the TAC does not allege how, what, where, to whom and by what means Miller Mayer and not the other Defendants made fraudulent representations to the detriment of Plaintiffs.

For these reasons, Miller Mayer’s demurrer to the first cause of action is sustained.

  1. Third Cause of Action: Negligent Misrepresentation

A Plaintiff must prove the following in order to recover on a negligent misrepresentation claim: ‘[M]isrepresentation Rolapp Shamsian

Miller Mayer contends that the TAC insufficiently pleads a cause of action for negligent misrepresentation against it because the TAC completely fails to allege any communication by Miller Mayer with Plaintiffs. (Demurrer, 13.) In opposition, Plaintiffs appear to argue that the TAC’s third cause of action is sufficiently pled as to Miller Mayer because “either defendant knew that the POM was false, or defendant acted with a reckless disregard for the truth.” (Opposition, 14.)

Here, the TAC alleges that “all of the representations in the POM were essentially fraudulent” and that nonetheless, Liu and Wang used “Defendants” to give credibility to the project. (TAC ¶ 73.) Further, “Defendants” continued to give “aid and assistance” to Liu and Wang after the first investments were made “by continuing to maintain the appearance of a legitimate project,” thereby causing Plaintiffs to invest. (TAC ¶ 74.) As a result of Defendants’ actions, Plaintiffs allegedly relied on the POM to their detriment. (TAC ¶¶ 74-77.) Finally, the TAC alleges that Miller Mayer and the other defendants “must have been painfully aware that Liu and Wang were scamming Plaintiffs.” (TAC ¶ 78.)

Given the foregoing, the court finds the TAC’s third cause of action is insufficiently pled as to Miller Mayer. As Miller Mayer contends, the TAC’s third cause of action fails to allege any communication or representation by Miller Mayer to Plaintiffs. Instead, the TAC’s third cause of action appears to repeat the first cause of action’s allegations about all defendants providing aid and assistance to Liu, and about Miller Mayer being “painfully aware” of Liu and Wang’s actions. Such allegations are insufficient to state a cause of action for negligent misrepresentation.

For these reasons, Miller Mayer’s demurrer to the third cause of action is sustained.

  1. Fourth Cause of Action: Penal Code 496(c)

Penal Code section 496, subdivision (a) provides as follows: “Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170.” Further, Penal Code section 496, subdivision (c) provides that any person who has been injured by a violation of subdivision (a) may bring an action for treble damages, attorney’s fees and costs.

Miller Mayer demurrers to the TAC’s fourth cause of action under Penal Code section 496, subdivision (c) for the same reasons as its demurrer to the first and third causes of action. (Demurrer, 13-14.) Specifically, Miller Mayer contends the TAC’s fourth cause of action is insufficiently pled because the TAC completely fails to allege what actions Miller Mayer and not the other Defendants engaged in which were in violation of Penal Code section 496(c). (Id.)

In opposition, Plaintiffs contend that the TAC’s fourth cause of action is sufficiently pled as to Miller Mayer because Miller Mayer “was the primary enabler of that fraud.” (Opposition, 15.)

The court agrees with Miller Mayer. The court has reviewed the TAC’s fourth cause of action and finds that the TAC’s allegations for this cause of action are substantially identical to the TAC’s allegations in support of the first three causes of action. (see TAC, ¶¶ 80-86.) Specifically, the TAC still alleges in support of the fourth cause of action that all “defendants” were involved in providing aid and assistance to Liu and Wang’s alleged scheme and “must have been painfully aware” that Plaintiffs were scammed by Liu and Wang. (Id.) However, such allegations fail to state a cause of action under Penal Code section 496, subdivision (c) against Miller Mayer individually because the TAC fails to describe what actions Miller Mayer and not the other Defendants engaged in.

For these reasons, Miller Mayer’s demurrer to the fourth cause of action is sustained.

  1. Leave to Amend

Finally, Miller Mayer argues that its demurrer to the TAC should be sustained without leave to amend because Plaintiffs’ action against Miller Mayer is incapable of proceeding without disclosure of attorney-client privileged communications. (Demurrer, 14-17.) Miller Mayer appears to argue that Plaintiff’s TAC against it must be dismissed in its entirety because every piece of evidence that Miller Mayer might present is entirely attorney-client privileged. (Demurrer, 16) Miller Mayer relies on General Dynamics Corp. v. Superior Court, (1994) 7 Cal.4th 1164, 1170 for this argument. (General Dynamics).

Miller Mayer’s reliance on General Dynamics is misplaced. The General Dynamics court analyzed whether an in-house attorney was able to pursue claims for damages following an allegedly wrongful termination. (Id. at 1169.) As such, General Dynamics’ holding is not applicable to the instant action, given that Miller Mayer is alleged to be the former attorneys for Liu, a non-party.

Given the foregoing, the court disagrees with Miller Mayer’s argument regarding the TAC as a whole and does not dismiss the TAC on this basis. Having sustained Miller Mayer’s demurrer to the TAC based on the foregoing reasons, the court does not reach the remainder of the parties’ arguments.

Conclusion

Miller Mayer’s demurrer to the TAC is sustained. Plaintiffs are given 20 days leave to amend from this date. Miller Mayer is to give notice.

MOTION TO STRIKE

Having sustained Miller Mayer’s demurrer to the TAC in its entirety, Miller Mayer’s motion to strike is MOOT.


[1] Moving Defendant submits the declaration of its attorney, Jennifer E. Newcomb (“Newcomb”) to demonstrate that it has complied with its statutory meet and confer obligations pursuant to Code of Civil Procedure sections 430.41 and 435.5 prior to filing the instant demurrer and motion to strike. Newcomb attests that after the Court of Appeal ruled on Plaintiff’s appeal to Miller Mayer’s anti-SLAPP motion, the parties agreed that Miller Mayer would have 30 days from the date of service of the TAC to file a responsive pleading. (Newcomb Decl. ¶ 2, Exhibit A.) Thereafter and according to Newcomb, the parties met and conferred by email regarding the issues addressed in Miller Mayer’s demurrer and motion to strike but were unable to come to an agreement. (Newcomb Decl. ¶¶ 3-8, Exhibits B-F.) Although the court ordinarily expects the parties to meet and confer in person or by telephone, the court finds that in this instance, the Newcomb Declaration is sufficient for purposes of Code of Civil Procedure sections 430.41 and 435.5.



Case Number: ****2775    Hearing Date: February 25, 2020    Dept: 23

HEARING DATE: February 25, 2020

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi, et al. v. Rachel H. Lew, et al.

MOVING PARTY: Defendant, Wolfsdorf Rosenthal, LLP

RESPONDING PARTY: Plaintiffs, Zhao Hui Shi and Jun Lu

TRIAL DATE: September 29, 2020

PROOF OF SERVICE: OK

MOTION: Wolfsdorf Rosenthal, LLP’s Motion for Attorney’s Fees on Appeal

OPPOSITION: February 10, 2020

REPLY: February 18, 2020

TENTATIVE: Wolfsdorf Rosenthal’s motion for attorney’s fees is granted in part. The court awards Wolfsdorf Rosenthal a total of $78,263.00. Wolfsdorf Rosenthal is to provide notice.

BACKGROUND

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program. Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”). Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rosenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”).

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property.

Wolfsdorf Rosenthal brought a Special Motion to Strike (“anti-SLAPP”) to Plaintiff’s First Amended Complaint, which was granted on April 17, 2018 other than as to Plaintiff’s legal malpractice cause of action. Plaintiff appealed the April 27, 2018 ruling on June 15, 2018.

On September 27, 2018, the court granted Wolfsdorf Rosenthal’s motion for attorney’s fees and awarded attorney’s fees in the amount of $34,541.35.

On July 15, 2019, Plaintiffs filed a Third Amended Complaint (“TAC”), alleging only legal malpractice against Wolfsdorf Rosenthal. On October 29, 2019, the Court of Appeal issued its opinion Plaintiff’s June 15, 2018 appeal. The Court of Appeal affirmed the April 27, 2018 ruling granting Wolfsdorf Rosenthal’s anti-SLAPP motion, finding that Wolfsdorf Rosenthal made a prima facie showing that prosecution of visa petitions with the United States Citizenship and Immigration Services (“USCIS”) is a protected activity. Further, the Court of Appeal concluded that Plaintiffs cannot meet their burden of establishing that their claims against Wolfsdorf Rosenthal have minimal merit, as Plaintiff’s pleadings and accompanying evidence did not tie Wolfsdorf Rosenthal to the wrongdoing alleged in the FAC as to the causes of action alleged other than legal malpractice. (see Court of Appeal Opinion of October 29, 2019, 2-3.) The Court of Appeal further concluded that Wolfsdorf Rosenthal was to recover its costs on appeal “relating to plaintiffs’ claims against it.” (Id. at 23.)

On November 6, 2019, Wolfsdorf Rosenthal’s demurrer to the TAC came on for hearing. The court sustained Wolfsdorf Rosenthal’s demurrer without leave to amend.

Wolfsdorf Rosenthal now moves to recover its attorney’s fees on appeal pursuant to the Court of Appeal’s October 29, 2019 opinion. Plaintiff opposes the motion.

DISCUSSION

  1. Legal Standard

Code of Civil Procedure, section 425.16, subdivision (c)(1) provides in relevant part: “[A] prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs.” (Code Civ. Proc. ; 425.16, subd. (c)(1).)[1] The fee-shifting provision is mandatory, and it is a mechanism intended to promote the policy underlying the anti-SLAPP statute generally—namely, to discourage SLAPP suits brought to chill the valid exercise of the constitutional rights of free speech and petition for the redress of grievances. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131 (Ketchum).)

The prevailing party may only recover the attorney fees incurred in connection with the special motion to strike, not the action as a whole. (See, e.g., Lafayette Morehouse, Inc. v. Chronicle Publ’g Co. (1995) 39 Cal.App.4th 1379, 1383 [“the Legislature intended that a prevailing defendant on a motion to strike be allowed to recover attorney fees and costs only on the motion to strike, not the entire suit”]; S.B. Beach Properties v. Berti (2006) 39 Cal.4th 374, 381 [“the fee ‘provision applies only to the motion to strike, and not to the entire action’ ”]; City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 218 [“The defendant can recover only its fees and costs in connection with the motion, not the entire action.”] (City of Industry).)

  1. Analysis

The court’s objective is to award a fee at the fair market value for the particular action. (Ketchum, supra, 24 Cal.4th at p. 1132.) The analysis generally begins with the lodestar figure—i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. (Id. at pp. 1131-1132.) The lodestar is the basic fee for comparable legal services in the community. (Id. at p. 1132.) The court may then adjust the lodestar to arrive at the fair market value of the legal services provided. In adjusting the lodestar, the court considers factors including (1) the contingent nature of the fee award, (2) the novelty and difficulty of the questions involved, (3) the skill displayed in presenting them, and (4) the extent to which the nature of the litigation precluded other employment by the attorneys. (Ibid.)

  1. Reasonableness of the Hourly Rates

“The reasonable hourly rate is that prevailing in the community for similar work.” (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.) “The experienced trial judge is the best judge of the value of professional services rendered in his court.” (Ibid.) The Court “need not simply award the sum requested. To the contrary, ascertaining the fee amount is left to the trial court's sound discretion.” (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1321 (Christian).) “The basis for the trial court’s calculation must be the actual hours counsel has devoted to the case, less those that result from inefficient or duplicative use of time.” (Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 395.) “The law is clear, however, that an award of attorney fees may be based on counsel’s declarations, without production of detailed time records. (Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1375.)

Wolfsdorf Rosenthal requests attorney’s fees and costs in the amount of $105,041.68 in connection with handling Plaintiff’s appeal of the April 27, 2018 as well as $16,978.49 in connection with the instant motion plus a $60.00 filing fee, for a total of $122,080.17. Wolsdorf Rosenthal submits declarations from Robert M. Shaughnessy (“Shaughnessy”), Valerie A. Moore (“Moore”) and Jennifer Saunders (“Saunders”) in support of its fee request.

First, Shaughnessy attests that he is a shareholder with the law firm Klinedinst PC, former attorneys of record for Wolsdorf Rosenthal. (Shaughnessy Decl. ¶ 1.) Shaughnessy attests that he has more than 25 years of experience researching, drafting, evaluating and arguing complex matters, including anti-SLAPP motion sat both the trial and appellate court levels. (Shaughnessy Decl. ¶ 4.) Shaughnessy attests that he is also a founding member of the San Diego Appellate Inns of Court. (Id.) Shaughnessy attests that while Klinedinst PC’s rates were $425-$450 in 2018 and 2019 for shareholders, Klinedinst PC billed shareholders at $250 per hour for this matter. (Shaughnessy Decl. ¶¶ 6-7.)

Second, Moore attests that she is a partner with the law firm Haight Brown & Bonesteel, LLP (“HBB”), counsel of record for Wolsdorf Rosenthal. (Moore Decl. ¶ 1.) Moore attests that she has been practicing for 36 years and has handled multiple appeals taken from trial court’s granting of anti-SLAPP motions. (Moore Decl. ¶ 3.) Moore also served as Chair of the Appellate Practice Group at HBB at the time she handled this appeal. (Id.) According to Moore, HBB’s usual rate for appellate work by partners in 2019 was $450. (Moore Decl. ¶ 9.) However, according to Moore, Wolsdorf Rosenthal was charged $245 per hour in this matter. (Moore Decl. ¶ 10.)

Third, Saunders attests that she is also a partner with HBB. (Saunders Decl. ¶ 1.) According to Saunders, she has practiced with HBB for her entire 34-year career and have focused on “defending professionals” at both the state and federal courts at the trial level. (Saunders Decl. ¶ 3.) Saunders also attests to frequently speaking on issue of professional liability and ethics, and to serving as an arbitrator on attorney-client fee disputes for over ten years. (Id.) According to Saunders, HBB billed its paralegals at $100 per hour for this matter. (Saunders Decl. ¶ 8.)

Notwithstanding each of Moore and Saunders’ declarations regarding HBB’s usual rates and the rates each billed under for this matter, Wolfsdorf Rosenthal requests a rate of $625.87 pursuant to the 2019 Laffey matrix for the work performed by Moore and Saunders. (Motion, 11.) They argue that in determining the reasonable hourly rate, the hourly rate actually charged to the applicant is not controlling and "do[es] not compel any particular award." (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1096; Nemecek & Cole v. Horn (2012) 208 Ca1.App.4th 641, 652 [hourly rate billed by insurance defense counsel did not represent the maximum hourly rate reasonably recoverable as fees). Where the attorney's actual charges to the client are less than the amount of a reasonable hourly rate, the court generally may increase the rate actually charged to the reasonable rate. (PLCM Group, 22 Ca1.4th at p. 1095 ["The reasonable hourly rate is that prevailing in the community for similar work. The lodestar figure may . . . be adjusted . . . to fix the fee at the fair market value for the legal services provided."]; Chacon v. Litke (2010) 181 Ca1.App.4th 1234, 1259 [lodestar method appropriate for calculating fee award and affirmed award exceeding actual hourly rate under fee agreement].

Plaintiffs contend that Wolfsdorf Rosenthal’s request for a rate of approximately $625 per hour in accordance with the Laffey index is excessive and that $250 should be deemed the appropriate rate. (Opposition, 4-7.) Plaintiffs point to each declaration, which indicates that Wolsdorf Rosenthal was actually billed at $250, for the proposition that the reasonable rate is $250 given that the declarations allegedly do not state any basis to conclude that Wolsdorf Rosenthal was getting a below-market rate. (Opposition, 5.) Further, Plaintiff contends generally that the anti-SLAPP and appeal were not complex and that a high rate for Wolfsdorf Rosenthal’s attorneys is thus not warranted. (Opposition, 4-7.)

The court notes that there is a range of “reasonable” billing rates in the community. While some courts have used the Laffey index as a reasonable rate, it certainly is not the only reasonable rate and is not compelled to be awarded in a specific case. The court’s obligation is to establish a reasonable rate for this case. Unfortunately, this court did not handle the underlying litigation or the appeal, so it does not have personal experience with the attorneys’ performance in this case. Plaintiff’s proposed rate of $250 is somewhat below the usual rates in this community for appeals, particularly appeals of anti-SLAPP rulings. It is an area where numerous new published opinions are being issued every month. As in Nemecek it may be appropriate to award a reasonable rate that exceeds the rate billed to the client. The court finds that the normal hourly rate charged by the Haight firm for partners for appellate work, $450 per hour, is an appropriate hourly rate for its partners on this matter. As Shaughnessy only requests 250 per hour, that amount will be awarded to him.

  1. Reasonableness of the Fees Request

“A defendant need not succeed in striking every challenged claim to be considered a prevailing defendant entitled to recover attorney fees and costs under the statute. Instead, a defendant is entitled to recover fees and costs in connection with a partially successful motion, unless the results obtained are insignificant and of no practical benefit to the defendant. [Citation.] A court awarding fees to the prevailing defendant on a partially successful special motion to strike must exercise its discretion in determining the amount of fees and costs to award in light of the defendant's relative success in achieving its litigation objectives. [Citations.]” (City of Industry, supra, 198 Cal.App.4th at p. 218.) “The fees awarded should include services for all proceedings, including discovery initiated by the opposing party pursuant to section 425.16, subdivision (g), directly related to the special motion to strike.” (Jackson v. Yarbray (2009) 179 Cal.App.4th 75, 92 (Jackson).) Furthermore, the statute is “broadly construed so as to effectuate the legislative purpose of reimbursing the prevailing defendant for expenses incurred in extricating herself from a baseless lawsuit.” (Id. at p. 93, citing Wilkerson v. Sullivan (2002) 99 Cal.App.4th 443, 446.)

Shaughnessy requests fees in connection with 21.20 hours of work on the anti-SLAPP appeal. (Shaughnessy Decl. ¶ 11.) Moore requests fees in connection with 133.3 hours of work on the anti-SLAPP appeal. (Moore Decl. ¶ 6.) Finally, Saunders requests fees in connection with 27 hours of attorney work on the anti-SLAPP appeal, as well as 9.3 hours of paralegal work. (Saunders Decl. ¶ 12.) In total, Wolfsdorf Rosenthal requests fees for 181.5 hours of attorney time and 9.3 hours of paralegal time.

Finally, Wolfsdorf Rosenthal requests $16,978.49 in connection with the instant motion for attorney’s fees. Wolfsdorf Rosenthal contends that this amount represents attorney hours “in excess of 27 hours” to prepare the instant motion, including preparing for and attending the hearing on same.

In opposition, Plaintiff contends that the fees requested for the anti-SLAPP appeal are generally inflated and represent requests for fees already received on September 27, 2018 in connection with the original anti-SLAPP motion. (Opposition, 3-4.) Plaintiff contends that the amount billed for legal research was excessive because “most of that research was already done for the initial anti-SLAPP motion.” (Id.) Further, Plaintiff also specifically contends that 54.1 hours billed for drafting the brief was excessive when compared with the length of the brief. (Id.)

Given the foregoing, the court finds that the neither Wolfsdorf Rosenthal’s total amount of hours spent on legal research nor its hours spent on drafting the appellate brief was excessive. Although the court has not been provided a copy of either brief to review, the court finds that in an appeal taken from an anti-SLAPP motion, Plaintiff’s contention is incorrect that “most of the research was already done for the initial anti-SLAPP motion.” An appeal necessarily involves additional legal research, including, by way of example, research on the issues of appealability and jurisdiction. Further, the court disagrees with Plaintiff’s argument that 54.1 hours is necessarily excessive for a 36-page appellate brief. Plaintiff has provided no further explanation or authority for their argument, other than their statements to the effect that the time spent is necessarily excessive. The court is not persuaded.

Accordingly, the court is inclined to award Wolfsdorf Rosenthal fees for the total amount of attorney and paralegal time its attorneys attest to having incurred. The amounts awarded are as follows:

Moore: $450 x 133.3 = $59,985

Saunders: $450 x 27 = $12,150

Paralegal: $100 x 9.3 = $930

Shaughnessy: = $5,198, as requested

Total: $78,263.00.

Conclusion

Wolfsdorf Rosenthal’s motion for attorney’s fees is granted in part. The court awards Wolfsdorf Rosenthal a total of $78,263.00. Wolfsdorf Rosenthal is to provide notice.


[1] All subsequent statutory references will be to the Code of Civil Procedure, unless otherwise specified.



Case Number: ****2775    Hearing Date: November 06, 2019    Dept: 37

HEARING DATE: November 6, 2019

CASE NUMBER: ****2775

TRIAL DATE: September 29, 2020

CASE NAME: Zhao Hui Shi, et al., v. Rachel H. Lew, et al.

SUBJECT: Demurrer to Plaintiffs’ Class Action Third Amended Complaint and Motion to Strike

MOVING PARTY: Defendant, Wolfsdorf Rosenthal LLP[1]

OPPOSING PARTY: Plaintiffs, Zhao Hui Shi and Jun Lu

TENTATIVE: The court SUSTAINS Wolfsdorf Rosenthal’s demurrer possibly with 30 days leave to amend. At the hearing, the parties should be prepared to discuss whether a reasonable possibility exists that the TAC can be amended to sufficiently state a cause of action against Wolfsdorf Rosenthal. Counsel for Wolfsdorf Rosenthal to give notice.

BACKGROUND

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program. Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”). Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rotenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”).

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. On April 17, 2018, the court granted Defendant Wolfsdorf Rosenthal’s special motion to strike (“anti-SLAPP motion”) in-part as to the first, third and fourth causes of action. The court denied the anti-SLAPP motion as to the second cause of action for legal malpractice on the grounds that Defendant had not met its burden to demonstrate that the claim arose from protected conduct. Plaintiffs filed the Second Amended Complaint (“SAC”) on May 25, 2018 asserting the same four causes of action. Plaintiffs only assert the second cause of action for legal malpractice against Wolfsdorf Rosenthal, and Wofsdorf Rosenthal filed its demurrer to the SAC on June 29, 2018, as well as a motion for sanctions pursuant to Code of Civil Procedure section 128.7

On August 28, 2018, the court sustained Wolfsdorf Rosenthal’s demurrer to the SAC with leave to amend. The court denied Wolfsdorf Rosenthal’s motion for sanctions. At the hearing, the court ruled that Plaintiffs may conduct “some precertification discovery”

On July 15, 2019, Plaintiffs filed a Third Amended Complaint (“TAC”), alleging the same four causes of action as the SAC. On August 16, 2019, Wolfsdorf Rosenthal filed the instant demurrer and motion to strike.

REQUEST FOR JUDICIAL NOTICE

Wolfsdorf Rosenthal requests that the court take judicial notice of the following pursuant to Evidence Code section 451, subdivision (a):

  1. The Privacy Act of 1974 (5 U.S.C. ;; 552, 552(a))

  2. The Immigration Act of 1990, providing for a United States EB-5 visa,

The court takes judicial notice as requested.

Wolfsdorf Rosenthal further requests that the court judicial notice of the following, pursuant to Evidence Code section 452(a):

  1. The fact that USCIS administers the EB-5 program (see www.uscis.gov/working-united-states/permanent-workers/employment-based-immmigration-fifth-preference-eb-5/about-eb-5-visa-classification

  2. USCIS’s definition of EB-5

  3. Requirements for USCIS approval of the EB-5 (8 C.F.R. 204.6(m).)

  4. Requirements for EB-5 centers to continue to receive approval

  5. USCIS’s May 30, 2013 Policy Memorandum

    The court does not take judicial notice of items 1 and 2 above. The court takes judicial notice of items 3, 4 and 5. As to items 3, 4 and 5, their existence and legal effect are judicially noticeable. (Evid. Code, ; 452, subds. (a), (c).) As to the remaining items, a review of the hyperlink Wolfsdorf Rosenthal includes in their Request indicates that the link Wolfsdorf Rosenthal submits does not exist as of the date of this ruling.

    Finally, Wolfsdorf Rosenthal also requests that the court take judicial notice of the following, pursuant to Evidence Code section 452, subdivisions, (d) and (g)-(h)”:

  1. The Court of Appeal Opinion, dated October 29, 2019 in this matter;

  2. The August 28, 2018 minute order with respect to Defendants’ demurrers to the SAC.

    The existence and legal effect of these documents are judicially noticeable. (Evid. Code, ;; 452, subd (d).)

DEMURRER

I. 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.)

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.)

  1. Analysis

Defendant Wolfsdorf Rosenthal demurs to the TAC on the grounds that Plaintiffs lack standing to bring this suit against Wolfsdorf Rosenthal, and on the grounds that Plaintiffs did not materially amend the TAC sufficient to state a legal malpractice cause of action against Wolfsdorf Rosenthal.

  1. Standing

A class action is a procedural mechanism and may not be used to achieve standing. (Philips v. Crocker-Citizens Nat. Bank (1974) 38 Cal.App.3d 901, 907 (Philips).) The Phillips court further held that a named plaintiff may not represent a class with claims against multiple defendants unless the named plaintiff has actually been injured by each of these defendants. (Id. at 908.)

Further, the United States Supreme Court has held that “if none of the named plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the defendants, none may seek relief on behalf of himself or any other member of the class.” (O’Shea v. Littleton (1974) 414 U.S. 488, 494.)

Wolfsdorf Rosenthal contends that Plaintiffs have still not alleged sufficient facts to establish standing. According to the TAC, Plaintiff Shi was represented by Defendant Rachel H. Lew, not Defendant Wolfsdorf Rosenthal. (TAC ¶ 10.) Plaintiff Lu allegedly paid a portion of the money invested by Shi; Lu was not represented by any named Defendant. (TAC ¶ 5.) Plaintiffs do not allege that Wolfsdorf Rosenthal represented them or owed them any legal duty. (See TAC ¶ 19.) Instead, Plaintiffs assert that the court ordered them to designate “subclassifications” at August 28, 2018 hearing and that, as ordered, they designated subclassifications in the TAC and thereby remedied the deficiencies in the TAC by separating out Wolfsdorf Rosenthal’s clients into their own subclassification. (Dem. Opp., 1-2.) Plaintiffs also assert that the court allowed them to conduct precertification discovery as to Wolfsdorf Rosenthal, and that they do not yet have information sufficient to assert standing against Wolfsdorf Rosenthal due to its noncompliance with discovery. (Dem. Opp., 2.) Further, Plaintiffs renew their arguments that all of the class members suffered the same $500,000 in the same manner. (Dem. Opp. 3-4.)

Plaintiffs’ arguments are not sufficient to establish that the named Plaintiffs have standing as to Defendant Wolfsdorf Rosenthal. The named Plaintiffs have not alleged any new facts sufficient to establish that Wolfsdorf Rosenthal owe them any duties or that Wolfsdorf Rosenthal represented them at any point during their immigration application. While Plaintiffs cite Wolfsdorf Rosenthal’s failure to comply with discovery for their failure to allege new facts, named Plaintiffs admit that this discovery relates to names and contact information of Wolfsdorf Rosenthal’s clients that may have invested in the EB-5 project. (Dem. Opp. 1-2.) However, such information does not and cannot aid named Plaintiffs themselves in establishing standing to sue Wolfsdorf Rosenthal.

Further, the named Plaintiffs’ designation of subclassifications do not establish standing against Wolfsdorf Rosenthal. Plaintiffs’ TAC still alleges that Plaintiff Shi was represented by Defendant Lew, not Wolfsdorf Rosenthal. (TAC ¶ 10.) Although Plaintiffs appear to have added additional language to emphasize that all alleged class members’ representation was exactly the same, this is insufficient and does not constitute new facts. Because Plaintiffs have not pled new facts sufficient to establish standing, the demurrer is hereby sustained.

Accordingly, the court SUSTAINS the demurrer to the TAC, as named Plaintiffs Shi and Lu do not have standing to bring an action against Wolfsdorf Rosenthal. For the sake of completeness, the court will address Defendant’s arguments regarding Plaintiffs’ ability to establish class treatment for their claims.

  1. Class Treatment and Commonality

The Supreme Court has recognized that courts may dispose of class actions on demurrer. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440; see Tucker v. Pacific Bell Mobile Servs. (2012) 208 Cal.App.4th 201, 215 (Tucker) [“Where a complaint, on its face, fails to allege facts sufficient to establish a community of interest as to the elements of the class claims, it would be a waste of time and judicial resources to require a full evidentiary hearing when the matter can properly be disposed of by demurrer.”].)

Code of Civil Procedure section 382 authorizes class actions ‘when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .’ The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.]

(Sav-On Drug Stores, Inc. v. Sup. Ct. (2004) 34 Cal.4th 319, 326.) “Class actions will not be permitted, for example, where there are diverse factual issues to be resolved, even though there may be many common questions of law.” (Brown v. Regents of Univ. of Cal. (1984) 151 Cal.App.3d 982, 988-989 (Brown).) A sufficient community of interests does not exist where claims involve factual questions that can only be resolved by individual proof, such as whether a particular class member relied upon an allegedly fraudulent representation. (Brown, id. at p. 989.)

Defendant Wolfsdorf Rosenthal contends that Plaintiffs’ causes of action are not appropriate for class treatment. (Dem. 13.) Defendant argues that Plaintiff’s legal malpractice claim requires an individualized inquiry into the representations made to each Plaintiff and the degree to which each Plaintiff relied on that representation. (Dem. 13-14.) According to Defendant, the proposed class Plaintiffs were represented by at least three different immigration attorneys: Lew, Wolfsdorf Rosenthal, and Derrico. (Dem. 13) Wolfsdorf Rosenthal argues that Plaintiffs cannot assert that each potential class member lost $500,000 in exactly the same fashion, as the reason that each invested in the EB-5 project is not the same. (Dem. 13-14.) For example, Wolfsdorf Rosenthal asserts that the named Plaintiffs do not have the same motivation, as Plaintiff Shi would have been looking to immigrate and obtain permanent residency, while Plaintiff Lu apparently hoped to obtain a profit on investment. (Dem., 14, fn. 2.) Accordingly, Wolfsdorf Rosenthal asserts that the factual issues between each of the purported plaintiffs and each of the defendants are “extraordinarily diverse.” (Dem., 14.)

Plaintiffs’ Opposition renews their factual argument that all class plaintiffs relied upon the same Private Offering Memorandum (“POM”) and, therefore, have nearly identical claims. (Dem. Opp., 9-10.) Plaintiffs do not cite any cases in support of their proposition, but instead assert that it is self-evident that the POM was fake. Plaintiffs further argue that because the POM was obviously fake, additional representations from the individual attorneys do not matter for purposes of determining commonality, as the allegedly fake POM and lack of “meaningful escrow” are sufficient by themselves to establish both fraud and commonality. (Id.)

Plaintiffs’ claims against Wolfsdorf Rosenthal involve factual questions that can only be resolved by individual proof, and the TAC thus fails to plead sufficient facts to establish the existence of a community of interests. (See Brown, supra, 151 Cal.App.3d at pp. 988-989.) Plaintiffs’ Opposition also does not cite any case law in support of their proposition that the allegedly fake POM, by itself, is sufficient to establish commonality. This constitutes additional grounds to sustain the demurrer.

Accordingly, the court hereby SUSTAINS Wolfsdorf Rosenthal’s demurrer, possibly with 30 days leave to amend. At the hearing, the parties should be prepared to discuss whether a reasonable possibility exists that the TAC can be amended to sufficiently state a cause of action against Wolfsdorf Rosenthal.

MOTION TO STRIKE

Having sustained the demurrer, the court finds that the motion to strike is MOOT.


[1] Jennifer K. Saunders, counsel for Defendant Wolfsdorf Rosenthal, attests that she spoke with plaintiffs’ counsel on August 9, 2019 to meet and confer regarding the TAC. (Declaration of Jennifer K. Saunders.) According to Ms. Saunders, it was clear based on the conversation that Plaintiffs’ counsel would not be able to resolve any of the issues raised in Defendant’s demurrer without court intervention. This declaration is sufficient to meet the statutory requirements. (See Code Civ. Proc., ;; 430.41, subd. (a); 435.5, subd. (a).)

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

HEARING DATE: November 6, 2019

CASE NUMBER: ****2775

TRIAL DATE: September 29, 2020

CASE NAME: Zhao Hui Shi, et al., v. Rachel H. Lew, et al.

SUBJECT: Demurrer to Plaintiffs’ Class Action Third Amended Complaint and Motion to Strike

MOVING PARTY: Defendant, Rachel H. Lew[1]

OPPOSING PARTY: Plaintiffs, Zhao Hui Shi and Jun Lu

TENTATIVE: The court SUSTAINS Rachel Lew’s demurrer with 30 days leave to amend. At the hearing, the parties should be prepared to discuss whether a reasonable possibility exists that the TAC can be amended to state class action claims against Defendant Rachel H. Lew. The motion to strike is MOOT. Counsel for Defendant Lew to give notice.

BACKGROUND

This action arises out of an alleged conspiracy by Defendants to defraud investors in connection with an investment visa program under the United States Government’s EB-5 investment visa program. Plaintiffs Zhao Hui Shi (“Shi”) and Jun Lu (“Lu”) seek to bring a class action on behalf of themselves and others similarly situated against Defendants who allegedly assisted nonparties Charles C. Liu (“Liu”) and Lisa Wang (“Wang”) in operating a fraudulent investment visa program (the “program”). Plaintiffs bring this action against Defendants Rachel H. Lew (“Lew”), John P. Thropay (“Thropay”), Wolfsdorf Rosenthal LLP (“Wolfsdorf Rosenthal,” erroneously sued as Wolfsdorf Rothenthal LLP), Miller Mayer, LLP (“Miller Mayer”), David Gerald Derrico (”Derrico”), and U.S. Regional Economic Development Authority, LLC (“USREDA”).

Plaintiffs filed the First Amended Complaint (“FAC”) on December 19, 2017, asserting four causes of action for: (1) fraud; (2) legal malpractice; (3) negligent misrepresentation; and (4) violation of Penal Code, section 496, subdivision (c), which relates to receipt of stolen property. Defendant Lew’s demurrer to the FAC and motion to strike came to hearing on May 2, 2018, at which time the court sustained the demurrer with leave to amend. Plaintiffs filed the Second Amended Complaint (“SAC”) on May 25, 2018 asserting the same four causes of action against Defendant Lew. Defendant Lew demurred to the SAC and on August 28, 2018, the court sustained defendant Lew’s demurrer to the SAC with leave to amend.

On July 15, 2019, Plaintiffs filed a Third Amended Complaint (“TAC”), alleging the same four causes of action against Defendant Lew. On August 20, 2019, Rachel H. Lew filed the instant demurrer and motion to strike.

REQUEST FOR JUDICIAL NOTICE

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.)

Defendant Rachel H. Lew requests the court take judicial notice of the complaint and orders filed in the case titled Securities and Exchange Commission v. Liu, et al., United States District Court, Central District of California Case No. 8:16-cv-00974 The existence and legal effect of these documents are judicially noticeable. (Evid. Code, ;; 452, subds. (c), (d).)

DEMURRER

I. 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.)

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

Defendant Lew demurs to the TAC on the grounds that there is no reasonable possibility that Plaintiffs can demonstrate a community of interest for class treatment. (Dem 4.) The Supreme Court has recognized that courts may dispose of class actions on demurrer. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440; see Tucker v. Pacific Bell Mobile Servs. (2012) 208 Cal.App.4th 201, 215 (Tucker) [“Where a complaint, on its face, fails to allege facts sufficient to establish a community of interest as to the elements of the class claims, it would be a waste of time and judicial resources to require a full evidentiary hearing when the matter can properly be disposed of by demurrer.”].)

Code of Civil Procedure section 382 authorizes class actions ‘when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .’ The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] The ‘community of interest’ requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.]

(Sav-On Drug Stores, Inc. v. Sup. Ct. (2004) 34 Cal.4th 319, 326.) “Class actions will not be permitted, for example, where there are diverse factual issues to be resolved, even though there may be many common questions of law.” (Brown v. Regents of Univ. of Cal. (1984) 151 Cal.App.3d 982, 988-989 (Brown).) A sufficient community of interests does not exist where claims involve factual questions that can only be resolved by individual proof, such as whether a particular class member relied upon an allegedly fraudulent representation. (Brown, id. at p. 989.)

Lew contends that class treatment is not warranted for the class allegations of the TAC because Plaintiffs are unable to plead the factors required to state class action claims. (Dem. 4-5.)

A. Commonality

First, Lew argues that Plaintiffs cannot plead that common questions of law and fact predominate over individualized questions. (Dem. 4-5, citing Brown, supra, 151 Cal.App.3d 982.) In Brown, the plaintiffs alleged the defendants engaged in common law fraud, among other claims, by making representations regarding the level of medical care at a medical center and the medical center’s failure to provide adequate coronary care. (Id. at pp. 986.) The Brown plaintiffs argued that the case had commonality because each plaintiff or their family was induced to receive coronary care at the medical center by certain misrepresentations. (Id. at pp. 989.) However, the Court of Appeal recognized that factual differences in the means by which the purported misrepresentations were communicated and the proximate cause of any plaintiff’s damage to their reliance on the misrepresentations presents a “quagmire of tough factual questions which can only be resolved by individual proof.” (Id.) For example, the Court of Appeal noted that each potential class member’s medical condition and method treatment must be examined to determine whether and to what extent the damage they claimed to have suffered is related to the misrepresentations allegedly communicated. (Id.)

Here, the TAC alleges that Shi is a Chinese national who, like dozens of other individuals, were solicited by Defendants or their agents to pay money to participate in an allegedly fraudulent investment visa program. (TAC ¶ 2, 4.) The other named Plaintiff, Lu, is alleged to be a resident of California who paid a portion of the money that was allegedly stolen by Liu. (TAC ¶ 4.) The TAC further alleges that non-parties Liu and Wang “met with investors and personally encouraged them to invest in the Pacific Proton EB-5 project” and engaged several marketing firms a number of which they allegedly controlled. (TAC ¶ 32.) Wang and Liu allegedly promoted the Pacific Proton offering through a website in which they made several affirmative representations including that the offering was a “secure and reliable investment project” which had advantages over other EB-5 projects. (Ibid.) According to the TAC, the proposed class plaintiffs were represented by different Defendant attorneys, and they relied upon the participation of these professionals in deciding to invest in the project.[2] (TAC ¶ 34.)

As with Brown, the wide array of alleged means by which the individual Plaintiffs were contacted and different factual circumstances involved with each proposed class member along with the varying allegations against the Defendant law firms demonstrate on the face of the TAC that there is a lack of commonality of issues to support class treatment of the claims. (See Brown, supra, 151 Cal.App.3d 982 at pp. 989.) For example, individual class plaintiffs appear to have been contacted and to have seen or relied upon different advertisements and different materials from different sources and in making their decision to invest in the Pacific Proton project. (See TAC ¶¶ 33-34.) Furthermore, the TAC alleges that the Defendant Lew only alleged to have represented ten of the proposed class members and is not alleged to have represented or provided any representations to those represented by other Defendants such as Wolfsdorf Rosenthal. (TAC, ¶¶ 45-47.)

Plaintiffs’ Opposition argues that the court ordered them to designate “subclassifications” at August 28, 2018 hearing and that, as ordered, they designated subclassifications in the TAC and thereby remedied the TAC’s deficiencies. (Dem. Opp., 1-2.) Further, Plaintiffs renew their arguments that all of the class members suffered the same $500,000 loss in the same manner. (Dem. Opp. 7-8.) Specifically, Plaintiffs argue that since the Private Offering Memorandum (“POM”) and lack of proper escrow made the EB-5’s fraudulent nature self-evident, that any more information about what each of the class plaintiffs would have been told is irrelevant for purposes of establishing commonality. (Id.)

Plaintiff’s arguments are insufficient because they do not address Brown or present any legal authority in support of their arguments concerning class commonality. (See Dem. Opp. 8-9.) Instead, Plaintiffs contend that Defendant Lew can be held liable for the entire alleged conspiracy based on her alleged conduct in willingly cooperating with a fraudulent plan. (Opp. 2-5, citing e.g., Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785.) Plaintiffs’ cited cases did not arise on class action and did not involve consideration of the standards required for class certification or commonality, and Plaintiffs’ cited cases are inapposite to the issue at hand. Plaintiffs likewise do not present any legal authority for the proposition that allegations of a conspiracy or Defendants’ conduct in aiding or abetting a conspiracy are alone sufficient to establish commonality and allow a class action. The court is not aware of any such legal authority. Accordingly, Plaintiffs’ argument fails.

The court finds that the individual issues concerning conduct by the non-parties who dealt with the individual class members and Defendants and awareness and reliance by the proposed class Plaintiffs demonstrate that the proposed class members present a “quagmire of tough factual questions which can only be resolved by individual proof.” (See Brown, supra, 151 Cal.App.3d 982 a p. 989.) Accordingly, the court finds that the TAC fails to meet the commonality requirement to plead a class action even if limited to the 10-person sub-class of individuals represented by Lew. The court therefore SUSTAINS the demurrer to the TAC. For the sake of completeness, the court will address the other two requirements to plead class action claims.

B. Typicality

“Under California’s class action statute, when a class action is brought against multiple defendants, the ‘action may only be maintained against defendants as to whom the class representative has a cause of action. Without such a personal cause of action, the prerequisite that the claims of the representative party be typical of the class cannot be met. If the plaintiff class representative only has a personal cause of action against one defendant and never had any claim of any kind against the remaining defendants, his claim is not typical of the class. . . . Th[is] . . . requirement is . . . not fulfilled merely because the plaintiffs allege that they suffered injuries similar to those of other parties at the hands of other defendants.’ ” (Hart v. County of Alameda (1999) 76 Cal.App.4th 766, 775-776.) “An exception to this rule applies where the plaintiff alleges the defendants acted under a conspiracy or the defendants are jointly responsible for the plaintiffs' injuries.” (Id. at p. 776.)

Here, the TAC alleges that Shi and nine others hired Lew to prosecute their immigration petition. (TAC ¶¶ 6(b), 10.) Shi does not allege that she retained Defendants Wolfsdorf Rosenthal or Derrico, nor does the TAC allege that Lu retained any Defendant attorney. However, the TAC alleges that Defendants conspired with each other in a common scheme to jointly defraud Plaintiffs by their actions. (TAC ¶¶ 5, 42.) At this stage of the proceedings, the court treats the allegations of the pleading as admitted. (See Berkley, supra, 152 Cal.App.4th at p. 525.) Viewing the allegations of the TAC liberally and in context, these allegations are sufficient for Plaintiffs Shi and Lu to plead that their claims are typical of the class. (See Hart, supra, 76 Cal.App.4th at pp. 775-776.) Accordingly, the court will not sustain demurrer to the class action complaint on this basis.

C. Conclusion

In sum, Defendant Lew meets her burden to demonstrate that Plaintiff’s class allegations are defective for lack of commonality. The court therefore SUSTAINS the demurrer to the TAC for failure to plead facts that would demonstrate commonality of the proposed class Plaintiffs’ claims. Having sustained the demurrer on this basis, the court need not address the parties’ arguments regarding the merits of Plaintiffs’ claims. At the hearing, the parties should be prepared to discuss whether a reasonable possibility exists that the identified defect can be corrected on amendment.

MOTION TO STRIKE

Having sustained the demurrer, the court finds that the motion to strike is MOOT.


[1] Rachel H. Lew attests that she attempted to meet and confer with plaintiffs’ counsel on August 6 and 13, 2019, but that plaintiffs’ counsel failed to meet and confer in good faith. (Declaration of Rachel H. Lew.) This declaration is sufficient to meet the statutory requirements. (See Code Civ. Proc., ;; 430.41, subd. (a); 435.5, subd. (a).)

[2] The TAC does not allege that Lu retained any of the named attorney Defendants.



Case Number: ****2775    Hearing Date: October 28, 2019    Dept: 37

HEARING DATE: October 28, 2019

CASE NUMBER: ****2775

CASE NAME: Zhao Hui Shi, et al. v. Rachel H. Lew, et al.

MOVING PARTY: Defendant Rachel H. Lew

OPPOSING PARTY: Plaintiffs Zhao Hui Shi and Jun Lu

TRIAL DATE: September 29, 2020

PROOF OF SERVICE: OK by mail on August 16, 2019

PROCEEDING: Demurrer to Class Action Third-Amended Complaint and Motion to Strike

OPPOSITION: Timely filed October 15, 2019

REPLY: Timely filed October 17, 2019

TENTATIVE: Defendant Lew’s demurrer is CONTINUED to November 6, 2019 to be heard with the demurrer filed by Defendant Wolfsdorf Rosenthal LLP.



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