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1 Randolph Gaw (SB #223718)
rgaw@gawpoe.com
2 Samuel Song (SB #245007)
ssong@gawpoe.com ELECTRONICALLY
3 GAW | POE LLP F I L E D
4 Embarcadero Center, Suite 1400 Superior Court of California,
4 San Francisco, CA 94111 County of San Francisco
Telephone: (415) 766-7451 03/06/2020
5 Facsimile: (415) 737-0642 Clerk of the Court
BY: RONNIE OTERO
6 Attorneys for Plaintiff Geoffrey Shmigelsky Deputy Clerk
7
8 SUPERIOR COURT FOR THE STATE OF CALIFORNIA
9 COUNTY OF SAN FRANCISCO
10
11 GEOFFREY SHMIGELSKY, Case No.: CGC-19-572740
Plaintiff, REPLY IN SUPPORT OF PLAINTIFF
12 GEOFFREY SHMIGELSKY’S
vs. DEMURRER TO FIRST AMENDED
13 CROSS-COMPLAINT OF DEFENDANT
GETAROUND, INC., SAM ZAID, ADAM GETAROUND, INC.
14 KOSMICKI, MOHAMED ZAID, AND
ILAN KROO, Hearing Date: March 13, 2020
15
Time: 9:30 a.m.
Defendants.
16 Dept.: 302
17 Reservation No. 02130313-01
18 GETAROUND, INC.,
Action Filed: January 14, 2019
Cross-Complainant,
19 Trial Date: Not set
vs.
20
GEOFFREY SHMIGELSKY, an
21 individual, and DOES ONE through
TWENTY, inclusive,
22
23 Cross-Defendants.
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25
26
27
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REPLY ISO PLAINTIFF’S DEMURRER TO
GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 TABLE OF CONTENTS
2 INTRODUCTION ........................................................................................................................... 1
3 ARGUMENT ................................................................................................................................... 2
4 I. THE BREACH OF CONTRACT CLAIM FAILS AS A MATTER OF LAW. ................. 2
5 A. The Releases Are Unenforceable as to Plaintiff’s Claims. ...................................... 2
6 B. The Agreement “Not to Make Any Claim Against the Company” Concerning
“the Information Provided by the Company to Transferor and Transferee” Does
7 Not Apply to Plaintiff’s Claims, and Is Unenforceable as to His Claims. ............... 3
8 C. The Agreements That Getaround Was Not Obligated “to Update or Correct
Such Information,” and That Plaintiff Would Not Rely on It, Do Not Apply to
9 Plaintiff’s Claims, and Are Unenforceable as to His Claims. .................................. 4
10 D. The Agreement That Getaround Had No Duty to Disclose Information About
the Company Is Unenforceable as to Plaintiff’s Claims. ......................................... 4
11
E. The Indemnification Clause Does Not Apply to Plaintiff’s Claims, Is
12 Unenforceable, and Does Not Allow Attorneys’ Fees or Expenses in this Action.. 5
13 II. THE PROMISSORY ESTOPPEL CLAIM FAILS AS A MATTER OF LAW. ................ 7
14 III. THE FRAUD IN THE INDUCEMENT CLAIM FAILS AS A MATTER OF LAW. ....... 9
15 IV. THE SECURITIES FRAUD CLAIM FAILS AS A MATTER OF LAW. ......................... 9
16 CONCLUSION .............................................................................................................................. 10
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REPLY ISO PLAINTIFF’S DEMURRER TO
-i- GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4
Alki Partners, LP v. DB Fund Servs., LLC,
5 4 Cal. App. 5th 574 (2016) .........................................................................................................6
6 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC,
158 Cal. App. 4th 226 (2007) .....................................................................................................9
7
Baker Pacific Corporation v. Suttles,
8 220 Cal. App. 3d 1148 (1990).....................................................................................................4
9 Blankenheim v. E. F. Hutton & Co.,
10 217 Cal. App. 3d 1463 (1990).....................................................................................................5
11 Boam v. Trident Fin. Corp.,
6 Cal. App. 4th 738 (1992) .......................................................................................................10
12
Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc.,
13 211 Cal. App. 4th 230 (2012) .....................................................................................................7
14 E. H. Morrill Co. v. State,
15 65 Cal. 2d 787 (1967) .................................................................................................................4
16 Fontenot v. Wells Fargo Bank, N.A.,
198 Cal. App. 4th 256 (2011) .....................................................................................................7
17
Hinesley v. Oakshade Town Center,
18 135 Cal. App. 4th 289 (2005) .....................................................................................................4
19 Jones v. ConocoPhillips Co.,
198 Cal. App. 4th 1187 (2011) ...................................................................................................5
20
21 Kashani v. Tsann Kuen China Enter. Co.,
118 Cal. App. 4th 531 (2004) .........................................................................................1, 2, 3, 4
22
McClain v. Octagon Plaza, LLC,
23 159 Cal. App. 4th 784 (2008) .....................................................................................................5
24 Mesler v. Bragg Mgmt. Co.,
39 Cal. 3d 290 (1985) .................................................................................................................4
25
Moss v. Kroner,
26
197 Cal. App. 4th 860 (2011) ...................................................................................................10
27
Sam Kohli Enterprises, Inc. v. BOC Grp., Inc.,
28 No. 11CV299 DMS BLM, 2011 WL 3298902 (S.D. Cal. Aug. 1, 2011) ..................................6
REPLY ISO PLAINTIFF’S DEMURRER TO
- ii - GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 San Diego City Firefighters v. Bd. of Admin. of San Diego City Emples.,
206 Cal. App. 4th 594 (2012) .............................................................................................1, 7, 8
2
Studley v. Benicia Unified Sch. Dist.,
3
230 Cal. App. 3d 454 (1991).......................................................................................................8
4
Tomerlin v. Canadian Indem. Co.,
5 61 Cal. 2d 638 (1964) .................................................................................................................8
6 Statutes
7 Cal. Civ. Code § 1572 ...................................................................................................................5, 6
8 Cal. Civ. Code § 1668 ............................................................................................................. passim
9 Cal. Civ. Code § 1717(a) ..................................................................................................................7
10
Cal. Corp. Code § 25401 .............................................................................................................1, 10
11
Cal. Corp. Code § 25501 .................................................................................................................10
12
Cal. Corp. Code § 25510 .................................................................................................................10
13
Cal. Ins. Code § 533 ..........................................................................................................................8
14
15
16
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19
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28
REPLY ISO PLAINTIFF’S DEMURRER TO
- iii - GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 INTRODUCTION
2 Getaround’s opposition disregards controlling California law, ignores most of Plaintiff’s
3 arguments, and purposefully mischaracterizes the rest. As shown in Plaintiff’s opening
4 memorandum (“MPA”), each agreement in the STAs that Getaround alleges Plaintiff breached by
5 suing the Getaround Defendants for fraud and intentional wrongdoing: (a) does not apply to
6 Plaintiff’s claims, (b) is not enforceable under Civil Code section 1668, or (c) both. (See Pltfs.’
7 MPA ISO Demurrer to FACC (“MPA”), filed Feb. 18, 2020, at 5-12.) Getaround’s response that
8 section 1668 does not apply to its breach of contract claim deliberately misses the point. (Opp. at
9 2, 3.) Getaround is seeking to enforce agreements that are, by their very nature, unenforceable as
10 to Plaintiff’s claims under section 1168 since Getaround seeks to use them to exempt the
11 Getaround Defendants from responsibility for their own fraud and intentional wrongdoing. As a
12 matter of law, Getaround cannot state a claim for breach of those unenforceable agreements. See
13 Kashani v. Tsann Kuen China Enter. Co., 118 Cal. App. 4th 531, 540, 559 (2004).
14 Getaround argues that it can plead both a promissory estoppel claim and a breach of
15 contract claim (Opp. at 2), but governing law holds that it cannot: “‘[A] plaintiff cannot state a
16 claim for promissory estoppel when the promise was given in return for proper consideration.
17 The claim instead must be pleaded as one for breach of the bargained-for contract.’” San Diego
18 City Firefighters v. Bd. of Admin. of San Diego City Emples., 206 Cal. App. 4th 594, 619 (2012).
19 Getaround contends that it has pled its fraud claim with particularity, but the only “facts”
20 it points to are Plaintiff’s complaints in this action (which are subject to the litigation privilege),
21 and utterly conclusory allegations of falsity, scienter, and intent to deceive. (Opp. at 2.)
22 Getaround claims that it was in privity such that it can sue for violation of Corporations
23 Code § 25401 (Opp. at 2), but the test is whether it was the “actual” or “literal” buyer of
24 Plaintiff’s stock, which it has admitted it was not. (MPA at 15.) It claims that it can seek
25 whatever civil remedy it wants (Opp. at 2-3), but the law says it cannot. (See MPA at 15.)
26 For these reasons and more, the Court should dismiss Getaround’s amended cross-
27 complaint. It should do so with prejudice and put an end to Getaround’s transparent retaliation
28 against Plaintiff for simply seeking to hold the Getaround Defendants for their alleged fraud.
REPLY ISO PLAINTIFF’S DEMURRER TO
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CASE NO. CGC-19-572740
1 ARGUMENT
2 I. THE BREACH OF CONTRACT CLAIM FAILS AS A MATTER OF LAW.
3 A. The Releases Are Unenforceable as to Plaintiff’s Claims.
4 Plaintiff showed that Getaround fails to state a claim for breach of the releases in the
5 STAs, because those releases are unenforceable as to Plaintiff’s claims under section 1668.
6 (MPA at 5-7.) Getaround argues that section 1668 “does not apply to [its] claim … for breach of
7 contract” since it “is not attempting to avoid liability for fraud or intentional misrepresentation.”
8 (Opp. at 3-4.) But this Court already found that the releases in the STAs “purport to ‘exempt [the
9 Getaround Defendants] from responsibility for [their] own fraud” and are thus “‘against the
10 policy of the law.’” (Order Re: Getaround Defs.’ Demurrer to FAC, filed Aug. 28, 2019, at 2
11 (quoting Cal. Civ. Code § 1668).) Because Getaround’s claim “is based on an agreement that
12 violates a law and is contrary to California public policy,” Getaround “may not recover damages
13 for any breach of that agreement.” Kashani, 118 Cal. App. 4th at 540, 559 (emphasis added).1
14 Getaround also argues that the releases are enforceable despite section 1668 because
15 Plaintiff has not alleged “intentional misrepresentations” or “affirmatively false statements.”
16 (Opp. at 4.) Of course, section 1668 is not limited to just that type of fraud. It makes
17 unenforceable any agreement purporting to “exempt [Getaround] from responsibility for [its] own
18 fraud, or willful injury to the person or property of another, or violation of law, whether willful or
19 negligent[.]” Cal. Civ. Code § 1668 (emphasis added). There is no dispute that the only claims
20 Plaintiff has asserted in this action are for fraud and intentional wrongdoing (i.e., fraudulent
21 concealment, constructive fraud, securities fraud, insider trading, and aiding and abetting insider
22 trading) (MPA at 3), and this Court already ruled that the releases are unenforceable as to all of
23 Plaintiff’s claims. (Order Re: Demurrer to FAC at 2.) Getaround cannot state a claim for breach
24 of an agreement that is unenforceable as a matter of law. Kashani, 118 Cal. App. 4th at 559.
25
1
26 Carbajal v. HSBC Bank U.S.A., N.A., No. CV 16-9297 PSG (FFMx), 2017 WL 7806585 (C.D.
Cal. Apr. 20, 2017), does not help Getaround. That case addressed whether section 1668 allowed
27 a plaintiff to assert a breach of contract claim “despite the exculpatory clause in the contract.” Id.
at *12. In contrast, the issue here is whether Getaround can assert a claim for breach of an
28 agreement that the Court has already determined is unenforceable.
REPLY ISO PLAINTIFF’S DEMURRER TO
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CASE NO. CGC-19-572740
1 B. The Agreement “Not to Make Any Claim Against the Company” Concerning
“the Information Provided by the Company to Transferor and Transferee”
2 Does Not Apply to Plaintiff’s Claims, and Is Unenforceable as to His Claims.
3 Plaintiff showed that Getaround’s claim that Plaintiff breached an agreement “not to make
4 any claim against the Company in connection” with “the information provided by the Company
5 to Transferor and Transferee” fails for two primary reasons: (1) that agreement does not apply to
6 any of Plaintiff’s claims, and (2) it is unenforceable as to Plaintiff’s claims. (MPA at 7-8.)
7 As to the first reason, Getaround does not dispute that suing any “other defendants” can
8 never amount to a breach of this agreement because it applies only to a claim “against the
9 Company.” (MPA at 7.) It does not deny that the agreement precludes only claims concerning
10 “the information provided by the Company.” (Id.) And it concedes that Plaintiff is claiming that
11 “the Getaround Defendants did not provide[] him” with information (Opp. at 5 (emphasis
12 added)), as this Court has confirmed. Getaround’s claim fails on this basis alone.2
13 Plaintiff further demonstrated that this agreement is inapplicable because Plaintiff has
14 never asserted a claim against Getaround based on “the information provided by the Company to
15 Transferor and Transferee.” (MPA at 7 (emphasis added).) Getaround responds by calling this
16 argument names. (See Opp. at 5.) But it does not dispute that:
17 a. the STA’s integration clause provides that it “sets forth the entire agreement and
18 understanding of the Parties relating to the subject matter herein and merges all prior
19 discussions between them,” (FACC, Ex. D (STA) § 11(b) (emphasis added); or
20 b. the only “information provided by the Company to Transferor and Transferee” that is
21 referenced in the STA concerns things like the “waiv[er] of any transfer restrictions (and
22 any notice requirements),” and that the shares “have not been registered under the
23 Securities Act” and are “‘restricted securities’ under applicable … laws.” (Id. §§ 4(b), 8.)
24
25 2
The fact that the Court previously dismissed Plaintiff’s claims for fraudulent concealment and
26 constructive fraud is irrelevant to this argument. (Opp. at 5.) It is undisputed that the Court has
recognized that the claims concerned the “Getaround Defendants’ omission to disclose”
27 information”—not any “information provided by the Company to Transferor and Transferee,” as
would be necessary to state a claim for breach of the agreement “not to make any claim against
28 the Company in connection” with that information. (MPA at 7 (emphasis added).)
REPLY ISO PLAINTIFF’S DEMURRER TO
-3- GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 Plaintiff has never asserted a claim in connection with any such information. (See MPA at 7-8.)
2 Thus, Getaround’s claim that Plaintiff breached this agreement “by suing Getaround and the other
3 defendants” in this action fails as a matter of law. (FACC ¶ 63.)
4 As to the second reason, Getaround does not deny that a covenant not to sue is materially
5 indistinguishable from a release of liability, Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290, 298
6 (1985), or that a covenant not to sue for fraud or intentional acts is unenforceable under section
7 1668. See Baker Pacific Corporation v. Suttles, 220 Cal. App. 3d 1148, 1151, 1154 (1990).
8 Thus, because the STA’s agreement “not to make any claim against the Company” is
9 unenforceable as to Plaintiff’s claims in this action, Getaround cannot state a claim for breach of
10 that agreement for this additional and independent reason. Kashani, 118 Cal. App. 4th at 559.
11 C. The Agreements That Getaround Was Not Obligated “to Update or Correct
Such Information,” and That Plaintiff Would Not Rely on It, Do Not Apply to
12 Plaintiff’s Claims, and Are Unenforceable as to His Claims.
13 Plaintiff showed that Getaround fails to allege a breach of the agreement that it had no
14 duty to “update or correct such information,” or that Plaintiff would not rely on that information,
15 for the same reasons discussed in the previous section. (MPA at 8-10 (emphasis added).)
16 Getaround does not deny that “such information” refers only to “the information provided by the
17 Company to Transferor and Transferee” that is referenced in the integrated STAs, and not to any
18 information Plaintiff alleges that the Getaround Defendants concealed from Plaintiff. (Id. at 9
19 (emphasis added); see also id. at 3.) Thus, Getaround’s claim that Plaintiff breached this
20 agreement by “filing this lawsuit” fails. (FACC ¶ 68.)
21 Getaround contends that Plaintiff “misses the point” (Opp. at 5), by arguing that these
22 agreements are unenforceable under section 1668. (MPA at 9-10.) But the point of this argument
23 is that Getaround cannot state a claim for breach of an unenforceable agreement that binding
24 precedent holds is “untenable,” E. H. Morrill Co. v. State, 65 Cal. 2d 787, 794 (1967), and
25 “inconsistent with California law.” Hinesley v. Oakshade Town Center, 135 Cal. App. 4th 289,
26 297 (2005). For either of the above reasons, Getaround’s claim fails as a matter of law.
27 D. The Agreement That Getaround Had No Duty to Disclose Information About
the Company Is Unenforceable as to Plaintiff’s Claims.
28
REPLY ISO PLAINTIFF’S DEMURRER TO
-4- GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 Plaintiff demonstrated that Getaround cannot state a claim for breach of any agreement in
2 the STAs that Getaround “had no duty to disclose any information to him … relating to the
3 Company,” because that agreement purports to bar a claim for fraudulent concealment and is thus
4 unenforceable under section 1668. (MPA at 10 (quoting FACC ¶ 69).) Getaround does not
5 dispute that any “stipulation intended to bar a party’s fraud claims does not bind the party … and
6 is of no effect.” McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 797-98 (2008)
7 (emphasis added). Nor does it deny that a stipulation that it had no duty to disclose information
8 relating to the Company would bar a claim for fraudulent concealment. See Jones v.
9 ConocoPhillips Co., 198 Cal. App. 4th 1187, 1198 (2011). Instead, Getaround contends that “the
10 argument that Getaround’s claim that it had no duty to disclose information about the Company
11 would bar a claim for fraudulent concealment makes no sense.” (Opp. at 5-6.) Of course, that is
12 not Plaintiff’s argument. It is that Getaround cannot state a claim for breach of an agreement that
13 is unenforceable as a matter of law. (MPA at 10.)
14 E. The Indemnification Clause Does Not Apply to Plaintiff’s Claims, Is
Unenforceable, and Does Not Allow Attorneys’ Fees or Expenses in this
15 Action.
16 Plaintiff showed that Getaround’s claim that Plaintiff breached an agreement to defend,
17 indemnify, and hold harmless the Getaround Defendants fails for three independent reasons.
18 (MPA at 10-12.) First, the duty to defend, indemnify, and hold harmless arises only in
19 connection with an “inaccuracy in or breach” of an agreement in the STAs. (MPA at 10-11
20 (quoting STA § 8).) As shown above and in the opening, Getaround does not and cannot allege
21 an inaccuracy in or breach of any enforceable agreement in the STAs. (See MPA at 5-11.)
22 Second, Getaround cannot use this indemnification clause to insulate itself from
23 responsibility for its own fraud due to section 1668. (MPA at 11.) Getaround does not disagree
24 with that principle, but attempts to distinguish Plaintiff’s cases. (Opp. at 6.) It says Blankenheim
25 v. E. F. Hutton & Co., 217 Cal. App. 3d 1463 (1990), refused to enforce a hold harmless
26 agreement to exempt a defendant from liability “for his own positive assertions.” Id. at 1473.
27 But section 1668 “provides that contracts exempting a party from liability for ‘fraud’ are against
28 the policy of the law,” id. at 1472, and Civil Code section 1572 defines “fraud” as including not
REPLY ISO PLAINTIFF’S DEMURRER TO
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CASE NO. CGC-19-572740
1 only a “positive assertion,” but also “[t]he suppression of that which is true, by one having
2 knowledge or belief of the fact” and “[a]ny other act fitted to deceive.” Cal. Civ. Code § 1572
3 (emphasis added). Section 1668 also applies beyond fraud, to intentional wrongdoing.
4 Getaround contends that the text cited by Plaintiff from Carbajal “does not appear in the
5 case” (Opp. at 6), but it does. See Carbajal, 2017 WL 7806585, at *3, *9-10. Getaround points
6 out that Sam Kohli Enterprises, Inc. v. BOC Grp., Inc., No. 11CV299 DMS BLM, 2011 WL
7 3298902 (S.D. Cal. Aug. 1, 2011), had a second reason for rejecting the defendants’ claim of
8 indemnification. Id. at *2. But its primary holding was that “in light of § 1668, an
9 indemnification clause may [not] exempt a party from liability … for claims involving fraud,
10 willful injury, or willful or negligent violation of the law.” Id.
11 The Court will also notice that Getaround does not cite any authority suggesting that it can
12 state a claim for breach of an indemnification clause purporting to require Plaintiff to defend,
13 indemnify, and hold harmless the Getaround Defendants for their own fraud and intentional acts.
14 Finally, Getaround does not dispute that the indemnification clause does not authorize
15 attorneys’ fees or expenses in an action between the contracting parties, and thus may not recover
16 them. (MPA at 11-12; Opp. at 6.) Getaround argues that Sam Zaid and Adam Kosmicki are not
17 parties to the STAs, and that Plaintiff agreed to “‘defend, indemnify and hold harmless the
18 Company, its directors, and officers[.]’” (Opp. at 6-7 (quoting STA § 8).) But that clause only
19 “relates to third party claims,” Alki Partners, LP v. DB Fund Servs., LLC, 4 Cal. App. 5th 574,
20 600 (2016) (emphasis added), and there is no third-party claim against Messrs. Zaid and
21 Kosmicki here. Further, the clause “does not even contain the phrase ‘prevailing party,’” and
22 thus does not authorize attorneys’ fees. Id. at 604. And Getaround’s position would still lead to
23 the absurd result that even if Messrs. Zaid and Kosmicki outright defrauded Plaintiff, Plaintiff
24 would supposedly have to pay to defend their fraud. (See MPA at 12.)
25 In sum, Getaround does not and cannot state a viable claim for breach of contract. Its
26 attempt to force Plaintiff to pay for the defense of its alleged fraud should be rejected.3
27
3
If the Court should determine that the indemnification clause does allow attorneys’ fees and
28
REPLY ISO PLAINTIFF’S DEMURRER TO
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CASE NO. CGC-19-572740
1 II. THE PROMISSORY ESTOPPEL CLAIM FAILS AS A MATTER OF LAW.
2 Getaround argues that the fact that “promissory estoppel is mutually exclusive of breach
3 of contract … has no bearing on whether Getaround has stated a claim for promissory estoppel.”
4 (Opp. at 10.) That is incorrect as a matter of law. As the Court of Appeal has explained:
5 If the promisee’s performance was requested at the time the promisor made his
promise and that performance was bargained for, the doctrine [of promissory
6 estoppel] is inapplicable…. Accordingly, a plaintiff cannot state a claim for
promissory estoppel when the promise was given in return for proper consideration.
7 The claim instead must be pleaded as one for breach of the bargained-for contract.
8 Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 275 (2011), disapproved of on other
9 grounds by Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919 (2016) (citations omitted)
10 (holding that because “promise … was given for proper consideration, … the complaint cannot
11 state a claim for promissory estoppel”).
12 Getaround’s attempts to distinguish the cases cited by Plaintiff fail. (Opp. at 10-11.) It
13 claims that Plaintiff “mischaracterized” Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 211
14 Cal. App. 4th 230, 243 (2012), (Opp. at 10), but Plaintiff quoted the relevant portions of that case
15 almost verbatim. (See MPA at 12.) Getaround points out that there was a bench trial on the
16 breach of contract and promissory estoppel claims, and that the court did not address “whether a
17 demurrer should be granted.” (Opp. at 10-11.) That was because the defendant “filed an answer”
18 to the complaint, rather than a demurrer. CMC Fabricators, 211 Cal. App. 4th at 235. If the
19 court had been presented with a demurrer, it quoted the controlling law from Fontenot excerpted
20 above. See id. at 244. Plaintiff quoted San Diego City Firefighters, 206 Cal. App. 4th at 619, for
21 the same rule of law. (MPA at 12-13.) Getaround’s contention that this case “does not hold that
22 a promissory estoppel claim is subject to demurrer where there is also pleaded an enforceable
23 contract” is demonstrably false. (Opp. at 11.) The court held that “there was more than adequate
24 consideration to support the parties’ promises in that agreement, and thus … we conclude the trial
25 court properly sustained without leave to amend City’s demurrer to the promissory estoppel
26 claim[.]” San Diego City Firefighters, 206 Cal. App. 4th at 619 (emphasis added). The portion
27
expenses in this action, but that Getaround otherwise fails to state a claim, Plaintiff should be
28 awarded prevailing party attorneys’ fees and expenses. See Cal. Civ. Code § 1717(a).
REPLY ISO PLAINTIFF’S DEMURRER TO
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CASE NO. CGC-19-572740
1 of the case Getaround cites addresses a different promissory estoppel claim. Id. at 611. And,
2 once again, Getaround fails to cite a single case holding that it can state a promissory estoppel
3 claim when sufficient consideration existed for the promises it alleges were breached. The only
4 authorities before the Court hold that it cannot do so.
5 Getaround also contends that it should be permitted to plead the claim in case the Court
6 determines that the above-discussed agreements by Plaintiff in the STAs are unenforceable.
7 (Opp. at 10.) As Plaintiff showed, even though those agreements are unenforceable as to
8 Plaintiff’s fraud claims, they still provide much more than the “proverbial ‘peppercorn’”
9 sufficient to find consideration. (MPA at 13 (quoting San Diego City Firefighters, 206 Cal. App.
10 4th at 619).) For instance, Plaintiff agreed “not to make any claim against the Company in
11 connection” with “the information provided by the Company to Transferor and Transferee”
12 referenced in the integrated STAs (and has not done so). (STA § 8.) Similarly, Plaintiff agreed to
13 indemnify Getaround against certain third-party claims. (Id.) Under the STA’s “Severability”
14 clause—which Getaround ignores—the unenforceable “provision[s of the STA] shall be
15 excluded,” and “the balance … shall be enforceable in accordance with its terms.” (Id. § 11(h);
16 see also MPA at 13 (citing authorities).)
17 Getaround also argues that it can state a promissory estoppel claim even where the
18 promises it seeks to enforce are “void against public policy.” (Opp. at 10 (citing Tomerlin v.
19 Canadian Indem. Co., 61 Cal. 2d 638, 641 (1964)).) Getaround is again incorrect. Tomerlin
20 found that an insurer was required “to extend coverage for liability based upon an intentional tort”
21 where the promises “arose after” the insurance contract was executed. Id. at 648 (emphasis in
22 original). In that situation, “[r]ecovery under a subsequent estoppel does not offend [the] public
23 policy” to “prevent insurance coverage from encouragement of willful tort” embodied in Civil
24 Code section 1668 (and Insurance Code section 533). Id. (emphasis added). Here, in contrast,
25 the alleged promises in the STAs were made at least concurrently with the consummation of the
26 intentional torts, as this Court has already found. (See Order Re: Getaround Defs.’ Demurrer to
27 FAC at 2.) In this situation, “an insurer may not indemnify against liability caused by the
28 insured’s wilful wrong.” Tomerlin, 61 Cal. 2d at 648; Studley v. Benicia Unified Sch. Dist., 230
REPLY ISO PLAINTIFF’S DEMURRER TO
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CASE NO. CGC-19-572740
1 Cal. App. 3d 454, 458 (1991) (“To allow insurance coverage for intentional injuries would be an
2 ‘encouragement of wilfull tort’ … by giving wrongdoers ‘a license to wreak havoc at will.’”).
3 In all events, even if the promissory estoppel claim were not subject to automatic
4 dismissal (which it is), it fails for the same reasons the breach of contract claim fails. (See MPA
5 at 13.) Getaround offers no response to this argument. (See Opp. at 9-11.)
6 III. THE FRAUD IN THE INDUCEMENT CLAIM FAILS AS A MATTER OF LAW.
7 Plaintiff demonstrated that Getaround fails to plead particularized facts showing that any
8 alleged promise was false when made, that Plaintiff knew it was false or recklessly disregarded its
9 truth or falsity, or intended to defraud anyone. (MPA at 13-14.) The only “facts” Getaround
10 points to are a grab-bag of allegations in Plaintiff’s various complaints regarding Plaintiff’s
11 reliance on information about Getaround, and past history of stock sales. (Opp. at 7-8.) It then
12 recites that “Getaround alleges this statement was false, that Shmigelsky knew it was false, [] that
13 he made it anyway in reckless and intentional disregard of the truth,” and that “he made this false
14 representation to induce Getaround to waive its restriction on his stock[.]” (Id.). Those
15 allegations are utterly conclusory, and should be disregarded. (MPA at 4 (courts ignore
16 “contentions, deductions or conclusions of law”).) They come nowhere close to meeting the
17 heightened pleading standards required to state a claim for fraud. (See MPA at 13.)
18 Moreover, Getaround’s theory of fraud is nonsensical. In its view, Plaintiff lied to induce
19 Getaround to let him sell his stock to the CEO’s family and friends for $1.80 per share in April
20 2018, while knowing and intending all along that he would sue them almost a year later for
21 fraudulently concealing the true value of his stock. Why would anyone do that?
22 At bottom, Getaround’s theory boils down to a claim that Plaintiff didn’t keep a promise
23 not to sue. But even if that promise applies to this lawsuit (which it doesn’t), the law is clear that
24 mere failure to perform a promise never states a claim for fraud. (See MPA at 14 (citing cases).)
25 IV. THE SECURITIES FRAUD CLAIM FAILS AS A MATTER OF LAW.
26 Getaround contends that it “was in privity” with Plaintiff. (Opp. at 9.) But to state its
27 claim for securities fraud, it had to be the “actual” or “literal” buyer of Plaintiff’s stock, Apollo
28
REPLY ISO PLAINTIFF’S DEMURRER TO
-9- GETAROUND’S AMENDED CROSS-COMPLAINT
CASE NO. CGC-19-572740
1 Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 253 (2007), which it
2 admits it was not. (See FACC ¶ 50.) The claim fails on this basis alone.4
3 Getaround next argues that “Section 25501 places no limits on recovery by third-parties
4 against purchasers or sellers who have deceived them in violation of section 25401.” (Opp. at 9.)
5 It cites no authority to support that argument, and it is wrong. A third-party like Getaround
6 cannot pursue a civil remedy for a violation of section 25401 at all. The only one who can is a
7 “person who purchase[d] a security from [Plaintiff]”—i.e., th
Preview
1 Randolph Gaw (SB #223718) rgaw@gawpoe.com 2 Samuel Song (SB #245007) ssong@gawpoe.com ELECTRONICALLY 3 GAW | POE LLP F I L E D 4 Embarcadero Center, Suite 1400 Superior Court of California, 4 San Francisco, CA 94111 County of San Francisco Telephone: (415) 766-7451 03/06/2020 5 Facsimile: (415) 737-0642 Clerk of the Court BY: RONNIE OTERO 6 Attorneys for Plaintiff Geoffrey Shmigelsky Deputy Clerk 7 8 SUPERIOR COURT FOR THE STATE OF CALIFORNIA 9 COUNTY OF SAN FRANCISCO 10 11 GEOFFREY SHMIGELSKY, Case No.: CGC-19-572740 Plaintiff, REPLY IN SUPPORT OF PLAINTIFF 12 GEOFFREY SHMIGELSKY’S vs. DEMURRER TO FIRST AMENDED 13 CROSS-COMPLAINT OF DEFENDANT GETAROUND, INC., SAM ZAID, ADAM GETAROUND, INC. 14 KOSMICKI, MOHAMED ZAID, AND ILAN KROO, Hearing Date: March 13, 2020 15 Time: 9:30 a.m. Defendants. 16 Dept.: 302 17 Reservation No. 02130313-01 18 GETAROUND, INC., Action Filed: January 14, 2019 Cross-Complainant, 19 Trial Date: Not set vs. 20 GEOFFREY SHMIGELSKY, an 21 individual, and DOES ONE through TWENTY, inclusive, 22 23 Cross-Defendants. 24 25 26 27 28 REPLY ISO PLAINTIFF’S DEMURRER TO GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 TABLE OF CONTENTS 2 INTRODUCTION ........................................................................................................................... 1 3 ARGUMENT ................................................................................................................................... 2 4 I. THE BREACH OF CONTRACT CLAIM FAILS AS A MATTER OF LAW. ................. 2 5 A. The Releases Are Unenforceable as to Plaintiff’s Claims. ...................................... 2 6 B. The Agreement “Not to Make Any Claim Against the Company” Concerning “the Information Provided by the Company to Transferor and Transferee” Does 7 Not Apply to Plaintiff’s Claims, and Is Unenforceable as to His Claims. ............... 3 8 C. The Agreements That Getaround Was Not Obligated “to Update or Correct Such Information,” and That Plaintiff Would Not Rely on It, Do Not Apply to 9 Plaintiff’s Claims, and Are Unenforceable as to His Claims. .................................. 4 10 D. The Agreement That Getaround Had No Duty to Disclose Information About the Company Is Unenforceable as to Plaintiff’s Claims. ......................................... 4 11 E. The Indemnification Clause Does Not Apply to Plaintiff’s Claims, Is 12 Unenforceable, and Does Not Allow Attorneys’ Fees or Expenses in this Action.. 5 13 II. THE PROMISSORY ESTOPPEL CLAIM FAILS AS A MATTER OF LAW. ................ 7 14 III. THE FRAUD IN THE INDUCEMENT CLAIM FAILS AS A MATTER OF LAW. ....... 9 15 IV. THE SECURITIES FRAUD CLAIM FAILS AS A MATTER OF LAW. ......................... 9 16 CONCLUSION .............................................................................................................................. 10 17 18 19 20 21 22 23 24 25 26 27 28 REPLY ISO PLAINTIFF’S DEMURRER TO -i- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Alki Partners, LP v. DB Fund Servs., LLC, 5 4 Cal. App. 5th 574 (2016) .........................................................................................................6 6 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226 (2007) .....................................................................................................9 7 Baker Pacific Corporation v. Suttles, 8 220 Cal. App. 3d 1148 (1990).....................................................................................................4 9 Blankenheim v. E. F. Hutton & Co., 10 217 Cal. App. 3d 1463 (1990).....................................................................................................5 11 Boam v. Trident Fin. Corp., 6 Cal. App. 4th 738 (1992) .......................................................................................................10 12 Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 13 211 Cal. App. 4th 230 (2012) .....................................................................................................7 14 E. H. Morrill Co. v. State, 15 65 Cal. 2d 787 (1967) .................................................................................................................4 16 Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011) .....................................................................................................7 17 Hinesley v. Oakshade Town Center, 18 135 Cal. App. 4th 289 (2005) .....................................................................................................4 19 Jones v. ConocoPhillips Co., 198 Cal. App. 4th 1187 (2011) ...................................................................................................5 20 21 Kashani v. Tsann Kuen China Enter. Co., 118 Cal. App. 4th 531 (2004) .........................................................................................1, 2, 3, 4 22 McClain v. Octagon Plaza, LLC, 23 159 Cal. App. 4th 784 (2008) .....................................................................................................5 24 Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290 (1985) .................................................................................................................4 25 Moss v. Kroner, 26 197 Cal. App. 4th 860 (2011) ...................................................................................................10 27 Sam Kohli Enterprises, Inc. v. BOC Grp., Inc., 28 No. 11CV299 DMS BLM, 2011 WL 3298902 (S.D. Cal. Aug. 1, 2011) ..................................6 REPLY ISO PLAINTIFF’S DEMURRER TO - ii - GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 San Diego City Firefighters v. Bd. of Admin. of San Diego City Emples., 206 Cal. App. 4th 594 (2012) .............................................................................................1, 7, 8 2 Studley v. Benicia Unified Sch. Dist., 3 230 Cal. App. 3d 454 (1991).......................................................................................................8 4 Tomerlin v. Canadian Indem. Co., 5 61 Cal. 2d 638 (1964) .................................................................................................................8 6 Statutes 7 Cal. Civ. Code § 1572 ...................................................................................................................5, 6 8 Cal. Civ. Code § 1668 ............................................................................................................. passim 9 Cal. Civ. Code § 1717(a) ..................................................................................................................7 10 Cal. Corp. Code § 25401 .............................................................................................................1, 10 11 Cal. Corp. Code § 25501 .................................................................................................................10 12 Cal. Corp. Code § 25510 .................................................................................................................10 13 Cal. Ins. Code § 533 ..........................................................................................................................8 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 REPLY ISO PLAINTIFF’S DEMURRER TO - iii - GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 INTRODUCTION 2 Getaround’s opposition disregards controlling California law, ignores most of Plaintiff’s 3 arguments, and purposefully mischaracterizes the rest. As shown in Plaintiff’s opening 4 memorandum (“MPA”), each agreement in the STAs that Getaround alleges Plaintiff breached by 5 suing the Getaround Defendants for fraud and intentional wrongdoing: (a) does not apply to 6 Plaintiff’s claims, (b) is not enforceable under Civil Code section 1668, or (c) both. (See Pltfs.’ 7 MPA ISO Demurrer to FACC (“MPA”), filed Feb. 18, 2020, at 5-12.) Getaround’s response that 8 section 1668 does not apply to its breach of contract claim deliberately misses the point. (Opp. at 9 2, 3.) Getaround is seeking to enforce agreements that are, by their very nature, unenforceable as 10 to Plaintiff’s claims under section 1168 since Getaround seeks to use them to exempt the 11 Getaround Defendants from responsibility for their own fraud and intentional wrongdoing. As a 12 matter of law, Getaround cannot state a claim for breach of those unenforceable agreements. See 13 Kashani v. Tsann Kuen China Enter. Co., 118 Cal. App. 4th 531, 540, 559 (2004). 14 Getaround argues that it can plead both a promissory estoppel claim and a breach of 15 contract claim (Opp. at 2), but governing law holds that it cannot: “‘[A] plaintiff cannot state a 16 claim for promissory estoppel when the promise was given in return for proper consideration. 17 The claim instead must be pleaded as one for breach of the bargained-for contract.’” San Diego 18 City Firefighters v. Bd. of Admin. of San Diego City Emples., 206 Cal. App. 4th 594, 619 (2012). 19 Getaround contends that it has pled its fraud claim with particularity, but the only “facts” 20 it points to are Plaintiff’s complaints in this action (which are subject to the litigation privilege), 21 and utterly conclusory allegations of falsity, scienter, and intent to deceive. (Opp. at 2.) 22 Getaround claims that it was in privity such that it can sue for violation of Corporations 23 Code § 25401 (Opp. at 2), but the test is whether it was the “actual” or “literal” buyer of 24 Plaintiff’s stock, which it has admitted it was not. (MPA at 15.) It claims that it can seek 25 whatever civil remedy it wants (Opp. at 2-3), but the law says it cannot. (See MPA at 15.) 26 For these reasons and more, the Court should dismiss Getaround’s amended cross- 27 complaint. It should do so with prejudice and put an end to Getaround’s transparent retaliation 28 against Plaintiff for simply seeking to hold the Getaround Defendants for their alleged fraud. REPLY ISO PLAINTIFF’S DEMURRER TO -1- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 ARGUMENT 2 I. THE BREACH OF CONTRACT CLAIM FAILS AS A MATTER OF LAW. 3 A. The Releases Are Unenforceable as to Plaintiff’s Claims. 4 Plaintiff showed that Getaround fails to state a claim for breach of the releases in the 5 STAs, because those releases are unenforceable as to Plaintiff’s claims under section 1668. 6 (MPA at 5-7.) Getaround argues that section 1668 “does not apply to [its] claim … for breach of 7 contract” since it “is not attempting to avoid liability for fraud or intentional misrepresentation.” 8 (Opp. at 3-4.) But this Court already found that the releases in the STAs “purport to ‘exempt [the 9 Getaround Defendants] from responsibility for [their] own fraud” and are thus “‘against the 10 policy of the law.’” (Order Re: Getaround Defs.’ Demurrer to FAC, filed Aug. 28, 2019, at 2 11 (quoting Cal. Civ. Code § 1668).) Because Getaround’s claim “is based on an agreement that 12 violates a law and is contrary to California public policy,” Getaround “may not recover damages 13 for any breach of that agreement.” Kashani, 118 Cal. App. 4th at 540, 559 (emphasis added).1 14 Getaround also argues that the releases are enforceable despite section 1668 because 15 Plaintiff has not alleged “intentional misrepresentations” or “affirmatively false statements.” 16 (Opp. at 4.) Of course, section 1668 is not limited to just that type of fraud. It makes 17 unenforceable any agreement purporting to “exempt [Getaround] from responsibility for [its] own 18 fraud, or willful injury to the person or property of another, or violation of law, whether willful or 19 negligent[.]” Cal. Civ. Code § 1668 (emphasis added). There is no dispute that the only claims 20 Plaintiff has asserted in this action are for fraud and intentional wrongdoing (i.e., fraudulent 21 concealment, constructive fraud, securities fraud, insider trading, and aiding and abetting insider 22 trading) (MPA at 3), and this Court already ruled that the releases are unenforceable as to all of 23 Plaintiff’s claims. (Order Re: Demurrer to FAC at 2.) Getaround cannot state a claim for breach 24 of an agreement that is unenforceable as a matter of law. Kashani, 118 Cal. App. 4th at 559. 25 1 26 Carbajal v. HSBC Bank U.S.A., N.A., No. CV 16-9297 PSG (FFMx), 2017 WL 7806585 (C.D. Cal. Apr. 20, 2017), does not help Getaround. That case addressed whether section 1668 allowed 27 a plaintiff to assert a breach of contract claim “despite the exculpatory clause in the contract.” Id. at *12. In contrast, the issue here is whether Getaround can assert a claim for breach of an 28 agreement that the Court has already determined is unenforceable. REPLY ISO PLAINTIFF’S DEMURRER TO -2- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 B. The Agreement “Not to Make Any Claim Against the Company” Concerning “the Information Provided by the Company to Transferor and Transferee” 2 Does Not Apply to Plaintiff’s Claims, and Is Unenforceable as to His Claims. 3 Plaintiff showed that Getaround’s claim that Plaintiff breached an agreement “not to make 4 any claim against the Company in connection” with “the information provided by the Company 5 to Transferor and Transferee” fails for two primary reasons: (1) that agreement does not apply to 6 any of Plaintiff’s claims, and (2) it is unenforceable as to Plaintiff’s claims. (MPA at 7-8.) 7 As to the first reason, Getaround does not dispute that suing any “other defendants” can 8 never amount to a breach of this agreement because it applies only to a claim “against the 9 Company.” (MPA at 7.) It does not deny that the agreement precludes only claims concerning 10 “the information provided by the Company.” (Id.) And it concedes that Plaintiff is claiming that 11 “the Getaround Defendants did not provide[] him” with information (Opp. at 5 (emphasis 12 added)), as this Court has confirmed. Getaround’s claim fails on this basis alone.2 13 Plaintiff further demonstrated that this agreement is inapplicable because Plaintiff has 14 never asserted a claim against Getaround based on “the information provided by the Company to 15 Transferor and Transferee.” (MPA at 7 (emphasis added).) Getaround responds by calling this 16 argument names. (See Opp. at 5.) But it does not dispute that: 17 a. the STA’s integration clause provides that it “sets forth the entire agreement and 18 understanding of the Parties relating to the subject matter herein and merges all prior 19 discussions between them,” (FACC, Ex. D (STA) § 11(b) (emphasis added); or 20 b. the only “information provided by the Company to Transferor and Transferee” that is 21 referenced in the STA concerns things like the “waiv[er] of any transfer restrictions (and 22 any notice requirements),” and that the shares “have not been registered under the 23 Securities Act” and are “‘restricted securities’ under applicable … laws.” (Id. §§ 4(b), 8.) 24 25 2 The fact that the Court previously dismissed Plaintiff’s claims for fraudulent concealment and 26 constructive fraud is irrelevant to this argument. (Opp. at 5.) It is undisputed that the Court has recognized that the claims concerned the “Getaround Defendants’ omission to disclose” 27 information”—not any “information provided by the Company to Transferor and Transferee,” as would be necessary to state a claim for breach of the agreement “not to make any claim against 28 the Company in connection” with that information. (MPA at 7 (emphasis added).) REPLY ISO PLAINTIFF’S DEMURRER TO -3- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 Plaintiff has never asserted a claim in connection with any such information. (See MPA at 7-8.) 2 Thus, Getaround’s claim that Plaintiff breached this agreement “by suing Getaround and the other 3 defendants” in this action fails as a matter of law. (FACC ¶ 63.) 4 As to the second reason, Getaround does not deny that a covenant not to sue is materially 5 indistinguishable from a release of liability, Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290, 298 6 (1985), or that a covenant not to sue for fraud or intentional acts is unenforceable under section 7 1668. See Baker Pacific Corporation v. Suttles, 220 Cal. App. 3d 1148, 1151, 1154 (1990). 8 Thus, because the STA’s agreement “not to make any claim against the Company” is 9 unenforceable as to Plaintiff’s claims in this action, Getaround cannot state a claim for breach of 10 that agreement for this additional and independent reason. Kashani, 118 Cal. App. 4th at 559. 11 C. The Agreements That Getaround Was Not Obligated “to Update or Correct Such Information,” and That Plaintiff Would Not Rely on It, Do Not Apply to 12 Plaintiff’s Claims, and Are Unenforceable as to His Claims. 13 Plaintiff showed that Getaround fails to allege a breach of the agreement that it had no 14 duty to “update or correct such information,” or that Plaintiff would not rely on that information, 15 for the same reasons discussed in the previous section. (MPA at 8-10 (emphasis added).) 16 Getaround does not deny that “such information” refers only to “the information provided by the 17 Company to Transferor and Transferee” that is referenced in the integrated STAs, and not to any 18 information Plaintiff alleges that the Getaround Defendants concealed from Plaintiff. (Id. at 9 19 (emphasis added); see also id. at 3.) Thus, Getaround’s claim that Plaintiff breached this 20 agreement by “filing this lawsuit” fails. (FACC ¶ 68.) 21 Getaround contends that Plaintiff “misses the point” (Opp. at 5), by arguing that these 22 agreements are unenforceable under section 1668. (MPA at 9-10.) But the point of this argument 23 is that Getaround cannot state a claim for breach of an unenforceable agreement that binding 24 precedent holds is “untenable,” E. H. Morrill Co. v. State, 65 Cal. 2d 787, 794 (1967), and 25 “inconsistent with California law.” Hinesley v. Oakshade Town Center, 135 Cal. App. 4th 289, 26 297 (2005). For either of the above reasons, Getaround’s claim fails as a matter of law. 27 D. The Agreement That Getaround Had No Duty to Disclose Information About the Company Is Unenforceable as to Plaintiff’s Claims. 28 REPLY ISO PLAINTIFF’S DEMURRER TO -4- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 Plaintiff demonstrated that Getaround cannot state a claim for breach of any agreement in 2 the STAs that Getaround “had no duty to disclose any information to him … relating to the 3 Company,” because that agreement purports to bar a claim for fraudulent concealment and is thus 4 unenforceable under section 1668. (MPA at 10 (quoting FACC ¶ 69).) Getaround does not 5 dispute that any “stipulation intended to bar a party’s fraud claims does not bind the party … and 6 is of no effect.” McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 797-98 (2008) 7 (emphasis added). Nor does it deny that a stipulation that it had no duty to disclose information 8 relating to the Company would bar a claim for fraudulent concealment. See Jones v. 9 ConocoPhillips Co., 198 Cal. App. 4th 1187, 1198 (2011). Instead, Getaround contends that “the 10 argument that Getaround’s claim that it had no duty to disclose information about the Company 11 would bar a claim for fraudulent concealment makes no sense.” (Opp. at 5-6.) Of course, that is 12 not Plaintiff’s argument. It is that Getaround cannot state a claim for breach of an agreement that 13 is unenforceable as a matter of law. (MPA at 10.) 14 E. The Indemnification Clause Does Not Apply to Plaintiff’s Claims, Is Unenforceable, and Does Not Allow Attorneys’ Fees or Expenses in this 15 Action. 16 Plaintiff showed that Getaround’s claim that Plaintiff breached an agreement to defend, 17 indemnify, and hold harmless the Getaround Defendants fails for three independent reasons. 18 (MPA at 10-12.) First, the duty to defend, indemnify, and hold harmless arises only in 19 connection with an “inaccuracy in or breach” of an agreement in the STAs. (MPA at 10-11 20 (quoting STA § 8).) As shown above and in the opening, Getaround does not and cannot allege 21 an inaccuracy in or breach of any enforceable agreement in the STAs. (See MPA at 5-11.) 22 Second, Getaround cannot use this indemnification clause to insulate itself from 23 responsibility for its own fraud due to section 1668. (MPA at 11.) Getaround does not disagree 24 with that principle, but attempts to distinguish Plaintiff’s cases. (Opp. at 6.) It says Blankenheim 25 v. E. F. Hutton & Co., 217 Cal. App. 3d 1463 (1990), refused to enforce a hold harmless 26 agreement to exempt a defendant from liability “for his own positive assertions.” Id. at 1473. 27 But section 1668 “provides that contracts exempting a party from liability for ‘fraud’ are against 28 the policy of the law,” id. at 1472, and Civil Code section 1572 defines “fraud” as including not REPLY ISO PLAINTIFF’S DEMURRER TO -5- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 only a “positive assertion,” but also “[t]he suppression of that which is true, by one having 2 knowledge or belief of the fact” and “[a]ny other act fitted to deceive.” Cal. Civ. Code § 1572 3 (emphasis added). Section 1668 also applies beyond fraud, to intentional wrongdoing. 4 Getaround contends that the text cited by Plaintiff from Carbajal “does not appear in the 5 case” (Opp. at 6), but it does. See Carbajal, 2017 WL 7806585, at *3, *9-10. Getaround points 6 out that Sam Kohli Enterprises, Inc. v. BOC Grp., Inc., No. 11CV299 DMS BLM, 2011 WL 7 3298902 (S.D. Cal. Aug. 1, 2011), had a second reason for rejecting the defendants’ claim of 8 indemnification. Id. at *2. But its primary holding was that “in light of § 1668, an 9 indemnification clause may [not] exempt a party from liability … for claims involving fraud, 10 willful injury, or willful or negligent violation of the law.” Id. 11 The Court will also notice that Getaround does not cite any authority suggesting that it can 12 state a claim for breach of an indemnification clause purporting to require Plaintiff to defend, 13 indemnify, and hold harmless the Getaround Defendants for their own fraud and intentional acts. 14 Finally, Getaround does not dispute that the indemnification clause does not authorize 15 attorneys’ fees or expenses in an action between the contracting parties, and thus may not recover 16 them. (MPA at 11-12; Opp. at 6.) Getaround argues that Sam Zaid and Adam Kosmicki are not 17 parties to the STAs, and that Plaintiff agreed to “‘defend, indemnify and hold harmless the 18 Company, its directors, and officers[.]’” (Opp. at 6-7 (quoting STA § 8).) But that clause only 19 “relates to third party claims,” Alki Partners, LP v. DB Fund Servs., LLC, 4 Cal. App. 5th 574, 20 600 (2016) (emphasis added), and there is no third-party claim against Messrs. Zaid and 21 Kosmicki here. Further, the clause “does not even contain the phrase ‘prevailing party,’” and 22 thus does not authorize attorneys’ fees. Id. at 604. And Getaround’s position would still lead to 23 the absurd result that even if Messrs. Zaid and Kosmicki outright defrauded Plaintiff, Plaintiff 24 would supposedly have to pay to defend their fraud. (See MPA at 12.) 25 In sum, Getaround does not and cannot state a viable claim for breach of contract. Its 26 attempt to force Plaintiff to pay for the defense of its alleged fraud should be rejected.3 27 3 If the Court should determine that the indemnification clause does allow attorneys’ fees and 28 REPLY ISO PLAINTIFF’S DEMURRER TO -6- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 II. THE PROMISSORY ESTOPPEL CLAIM FAILS AS A MATTER OF LAW. 2 Getaround argues that the fact that “promissory estoppel is mutually exclusive of breach 3 of contract … has no bearing on whether Getaround has stated a claim for promissory estoppel.” 4 (Opp. at 10.) That is incorrect as a matter of law. As the Court of Appeal has explained: 5 If the promisee’s performance was requested at the time the promisor made his promise and that performance was bargained for, the doctrine [of promissory 6 estoppel] is inapplicable…. Accordingly, a plaintiff cannot state a claim for promissory estoppel when the promise was given in return for proper consideration. 7 The claim instead must be pleaded as one for breach of the bargained-for contract. 8 Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 275 (2011), disapproved of on other 9 grounds by Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919 (2016) (citations omitted) 10 (holding that because “promise … was given for proper consideration, … the complaint cannot 11 state a claim for promissory estoppel”). 12 Getaround’s attempts to distinguish the cases cited by Plaintiff fail. (Opp. at 10-11.) It 13 claims that Plaintiff “mischaracterized” Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 211 14 Cal. App. 4th 230, 243 (2012), (Opp. at 10), but Plaintiff quoted the relevant portions of that case 15 almost verbatim. (See MPA at 12.) Getaround points out that there was a bench trial on the 16 breach of contract and promissory estoppel claims, and that the court did not address “whether a 17 demurrer should be granted.” (Opp. at 10-11.) That was because the defendant “filed an answer” 18 to the complaint, rather than a demurrer. CMC Fabricators, 211 Cal. App. 4th at 235. If the 19 court had been presented with a demurrer, it quoted the controlling law from Fontenot excerpted 20 above. See id. at 244. Plaintiff quoted San Diego City Firefighters, 206 Cal. App. 4th at 619, for 21 the same rule of law. (MPA at 12-13.) Getaround’s contention that this case “does not hold that 22 a promissory estoppel claim is subject to demurrer where there is also pleaded an enforceable 23 contract” is demonstrably false. (Opp. at 11.) The court held that “there was more than adequate 24 consideration to support the parties’ promises in that agreement, and thus … we conclude the trial 25 court properly sustained without leave to amend City’s demurrer to the promissory estoppel 26 claim[.]” San Diego City Firefighters, 206 Cal. App. 4th at 619 (emphasis added). The portion 27 expenses in this action, but that Getaround otherwise fails to state a claim, Plaintiff should be 28 awarded prevailing party attorneys’ fees and expenses. See Cal. Civ. Code § 1717(a). REPLY ISO PLAINTIFF’S DEMURRER TO -7- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 of the case Getaround cites addresses a different promissory estoppel claim. Id. at 611. And, 2 once again, Getaround fails to cite a single case holding that it can state a promissory estoppel 3 claim when sufficient consideration existed for the promises it alleges were breached. The only 4 authorities before the Court hold that it cannot do so. 5 Getaround also contends that it should be permitted to plead the claim in case the Court 6 determines that the above-discussed agreements by Plaintiff in the STAs are unenforceable. 7 (Opp. at 10.) As Plaintiff showed, even though those agreements are unenforceable as to 8 Plaintiff’s fraud claims, they still provide much more than the “proverbial ‘peppercorn’” 9 sufficient to find consideration. (MPA at 13 (quoting San Diego City Firefighters, 206 Cal. App. 10 4th at 619).) For instance, Plaintiff agreed “not to make any claim against the Company in 11 connection” with “the information provided by the Company to Transferor and Transferee” 12 referenced in the integrated STAs (and has not done so). (STA § 8.) Similarly, Plaintiff agreed to 13 indemnify Getaround against certain third-party claims. (Id.) Under the STA’s “Severability” 14 clause—which Getaround ignores—the unenforceable “provision[s of the STA] shall be 15 excluded,” and “the balance … shall be enforceable in accordance with its terms.” (Id. § 11(h); 16 see also MPA at 13 (citing authorities).) 17 Getaround also argues that it can state a promissory estoppel claim even where the 18 promises it seeks to enforce are “void against public policy.” (Opp. at 10 (citing Tomerlin v. 19 Canadian Indem. Co., 61 Cal. 2d 638, 641 (1964)).) Getaround is again incorrect. Tomerlin 20 found that an insurer was required “to extend coverage for liability based upon an intentional tort” 21 where the promises “arose after” the insurance contract was executed. Id. at 648 (emphasis in 22 original). In that situation, “[r]ecovery under a subsequent estoppel does not offend [the] public 23 policy” to “prevent insurance coverage from encouragement of willful tort” embodied in Civil 24 Code section 1668 (and Insurance Code section 533). Id. (emphasis added). Here, in contrast, 25 the alleged promises in the STAs were made at least concurrently with the consummation of the 26 intentional torts, as this Court has already found. (See Order Re: Getaround Defs.’ Demurrer to 27 FAC at 2.) In this situation, “an insurer may not indemnify against liability caused by the 28 insured’s wilful wrong.” Tomerlin, 61 Cal. 2d at 648; Studley v. Benicia Unified Sch. Dist., 230 REPLY ISO PLAINTIFF’S DEMURRER TO -8- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 Cal. App. 3d 454, 458 (1991) (“To allow insurance coverage for intentional injuries would be an 2 ‘encouragement of wilfull tort’ … by giving wrongdoers ‘a license to wreak havoc at will.’”). 3 In all events, even if the promissory estoppel claim were not subject to automatic 4 dismissal (which it is), it fails for the same reasons the breach of contract claim fails. (See MPA 5 at 13.) Getaround offers no response to this argument. (See Opp. at 9-11.) 6 III. THE FRAUD IN THE INDUCEMENT CLAIM FAILS AS A MATTER OF LAW. 7 Plaintiff demonstrated that Getaround fails to plead particularized facts showing that any 8 alleged promise was false when made, that Plaintiff knew it was false or recklessly disregarded its 9 truth or falsity, or intended to defraud anyone. (MPA at 13-14.) The only “facts” Getaround 10 points to are a grab-bag of allegations in Plaintiff’s various complaints regarding Plaintiff’s 11 reliance on information about Getaround, and past history of stock sales. (Opp. at 7-8.) It then 12 recites that “Getaround alleges this statement was false, that Shmigelsky knew it was false, [] that 13 he made it anyway in reckless and intentional disregard of the truth,” and that “he made this false 14 representation to induce Getaround to waive its restriction on his stock[.]” (Id.). Those 15 allegations are utterly conclusory, and should be disregarded. (MPA at 4 (courts ignore 16 “contentions, deductions or conclusions of law”).) They come nowhere close to meeting the 17 heightened pleading standards required to state a claim for fraud. (See MPA at 13.) 18 Moreover, Getaround’s theory of fraud is nonsensical. In its view, Plaintiff lied to induce 19 Getaround to let him sell his stock to the CEO’s family and friends for $1.80 per share in April 20 2018, while knowing and intending all along that he would sue them almost a year later for 21 fraudulently concealing the true value of his stock. Why would anyone do that? 22 At bottom, Getaround’s theory boils down to a claim that Plaintiff didn’t keep a promise 23 not to sue. But even if that promise applies to this lawsuit (which it doesn’t), the law is clear that 24 mere failure to perform a promise never states a claim for fraud. (See MPA at 14 (citing cases).) 25 IV. THE SECURITIES FRAUD CLAIM FAILS AS A MATTER OF LAW. 26 Getaround contends that it “was in privity” with Plaintiff. (Opp. at 9.) But to state its 27 claim for securities fraud, it had to be the “actual” or “literal” buyer of Plaintiff’s stock, Apollo 28 REPLY ISO PLAINTIFF’S DEMURRER TO -9- GETAROUND’S AMENDED CROSS-COMPLAINT CASE NO. CGC-19-572740 1 Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 253 (2007), which it 2 admits it was not. (See FACC ¶ 50.) The claim fails on this basis alone.4 3 Getaround next argues that “Section 25501 places no limits on recovery by third-parties 4 against purchasers or sellers who have deceived them in violation of section 25401.” (Opp. at 9.) 5 It cites no authority to support that argument, and it is wrong. A third-party like Getaround 6 cannot pursue a civil remedy for a violation of section 25401 at all. The only one who can is a 7 “person who purchase[d] a security from [Plaintiff]”—i.e., th