Preview
1
Brian Zimmerman (admitted pro hac vice)
2 Nicholas Reisch (admitted pro hac vice)
Jessica E. Chong (SBN 317869)
3 SPENCER FANE LLP
3040 Post Oak Blvd., Suite 1400
4 Houston, TX 77056
(713) 552-1234 telephone
5
Ernesto F. Aldover (SBN 157625)
6 RETZ & ALDOVER, LLP
2550 Via Tejon, Suite 3A
7 Palos Verdes Estates, California 90274
(310) 540-9800 telephone
8
Attorneys for Defendants
9 Gregory J. Davis, Kevin Wolfe, Jason Justesen,
Paramont Woodside, LLC, Paramont Capital, LLC,
10 SVRV 385 Moore, LLC, and SVRV 387 Moore, LLC
11 SUPERIOR COURT OF THE STATE OF CALIFORNIA
12 COUNTY OF SAN MATEO
13
Robert Arntsen; Mary Lee; Arntsen Family Case No. 22-CIV-01148
14 Partnership, LP; and Brian Christopher Dunn
Custodianship; NOTICE OF DEMURRER AND
15 DEFENDANTS SVRV 385 MOORE, LLC,
Plaintiffs, SVRV 387 MOORE, LLC, GREGORY J.
16 DAVIS, KEVIN WOLFE, JASON
-vs- JUSTESEN, PARAMONT WOODSIDE,
17 LLC, PARAMONT CAPITAL, LLC’S
David M. Bragg; Kurtis Stuart Kludt; Silicon DEMURRER TO PLAINTIFFS’ FIRST
18 Valley Real Ventures, LLC; SVRV 385 Moore, AMENDED COMPLAINT
LLC; SVRV 387 Moore, LLC; Gregory J.
19 Davis; Paramont Woodside, LLC; and [Declaration of Jessica E. Chong, Esq., and
Paramont Capital, LLC; Notice of Motion to Strike and Defendants
20 SVRV 385 Moore, LLC, SVRV 387 Moore,
Defendants. LLC, Gregory J. Davis, Kevin Wolfe, Jason
21 Justesen, Paramont Woodside, LLC,
Paramont Capital, LLC’s Motion to Strike
22 filed concurrently herewith]
23 [Hon. Robert D. Foiles]
24
Date: May 26, 2023
25 Time: 9:00 AM
Dept.: 21
26
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MEMO. IN SUPP. OF DEMURRER PAGE I
1 TO THE COURT, PLAINTIFFS, AND THEIR ATTORNEYS OF RECORD:
2 PLEASE TAKE NOTICE that on May 26, 2023 at 9:00 a.m. or as soon thereafter as the
3 matter may be heard in Department 21 of the above-entitled court, located at 800 North Humboldt
4 Street, San Mateo, California 94401, Defendants SVRV 385 Moore, LLC, SVRV 387 Moore, LLC,
5 Gregory J. Davis, Keving Wolfe, Jason Justesen, Paramont Woodside, LLC, and Paramont Capital,
6 LLC, hereby moves this Court for an order granting their Demurrer to Plaintiff’s First Amended
7 Complaint. This Demurrer is based upon this notice, the memorandum of points and authorities,
8 the declaration of Jessica E. Chong, Esq., filed concurrently with this motion, the pleadings and
9 records contained in the file, and any oral documentary evidence presented to the court at the time
10 of the hearing.
11 Dated: March 21, 2023 SPENCER FANE LLP
12
13 By: /s/ Jessica E. Chong
Brian Zimmerman (admitted pro hac vice)
14 Nicholas Reisch (admitted pro hac vice)
Jessica E. Chong (SBN 317869)
15 SPENCER FANE LLP
3040 Post Oak Blvd., Suite 1400
16 Houston, TX 77056
17 and
18 Ernesto F. Aldover, Esq.
RETZ & ALDOVER, LLP
19 2550 Via Tejon, Suite 3A
Palos Verdes Estates, CA 90274
20 Attorneys for Defendants SVRV 385 Moore
LLC, SVRV 387 LLC Moore LLC Gregory
21 J. Davis; Kevin Wolfe; Jason Justesen;
Paramont Woodside, LLC; and Paramont
22 Capital, LLC
23
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MEMO. IN SUPP. OF DEMURRER PAGE II
HOU 4845786.2
1 SUMMARY OF ARGUMENT
2 According to Plaintiffs’ First Amended Complaint (“FAC”), Plaintiffs loaned money to
3 defendant Silicon Valley Real Ventures, LLC (SVRV). They did so based on alleged fraudulent
4 representations made by two of SVRV’s members, Bragg and Kludt. However, Plaintiffs attempt
5 to expand their claims to other defendants: SVRV 385 Moore LLC, SVRV 387 LLC Moore LLC
6 (collectively “Moore Road LLCs”), Gregory J. Davis, Kevin Wolfe, Jason Justesen, Paramont
7 Woodside LLC, and Paramont Capital, LLC.
8 Based on the FAC, the only connection between Plaintiffs and the Moore Road LLCs is a
9 tangential one: SVRV was a member in both entities. But that connection is not enough to support
10 Plaintiffs’ claims against those entities. There is even less connection between Plaintiffs and Davis,
11 Wolfe, Justesen, Paramont Woodside, and Paramont Capital. None of them ever had any
12 communications or relationship with the Plaintiffs and the FAC does not assert otherwise.
13 The Moore Road LLCs, Davis, Wolfe, Justesen, Paramont Woodside, and Paramont Capital
14 (collectively “demurring Defendants”) all assert a demurrer to Plaintiffs’ FAC because it does not
15 allege sufficient facts meeting each element of any of the nine causes of action (of eleven total)
16 asserted against the demurring Defendants in the FAC.
17 As to Plaintiffs’ fraud claims against the Moore Road LLCs, the FAC is devoid of factual
18 allegations with the requisite particularity, including how, when, where, to whom, and by what
19 means any alleged representations were made by Moore Road LLCs. Plaintiffs’ third and fifth
20 causes of action for violations of the Cal. Bus. and Prof. Code Section 17000 et seq., also fail
21 because that statute does not permit the remedy of damages, the only remedy sought by Plaintiffs.
22 In addition, as to the Section 17000 claims, Plaintiffs have not, and cannot plead specific facts that
23 support such a claim. The FAC does not identify a particular section of the statutory scheme which
24 Defendants violated or assert facts satisfying the elements of an unfair practices claim.
25 Plaintiff’s sixth and seventh causes of action for fraudulent concealment fails because they
26 (1) have not established that demurring Defendants were in a fiduciary capacity to disclose any
27 information and (2) have not properly plead a fraud claim against the entity defendants.
28
MEMO. IN SUPP. OF DEMURRER PAGE III
HOU 4845786.2
1 Plaintiffs’ eighth cause of action for breach of fiduciary duty fails because Plaintiffs fail to
2 allege any facts that would establish a fiduciary relationship as to the demurring Defendants.
3 Plaintiffs’ ninth cause of action for breach of contract fails because (1) it does not state facts
4 sufficient to constitute a cause of action and (2) it is fatally uncertain. Indeed, Plaintiffs have not
5 alleged the bare minimum – that there was a valid contract between Plaintiffs and the demurring
6 Defendants.
7 Plaintiff’s tenth cause of action for breach of oral contract fails because (i) the FAC lacks
8 any specificity to establish that an oral contact existed between any of the Plaintiffs and the
9 demurring Defendants; and (ii) the claim is barred by the statute of frauds. Plaintiff’s eleventh cause
10 of action for quasi contract, restitution, and unjust enrichment also fails because Plaintiffs’ have
11 not alleged sufficient facts as to the demurring Defendants to support such a claim.
12 For these reasons, which are explained more fully below, the demurrer to each cause of
13 action in the FAC should be sustained. Moreover, a pleadings amendment cannot cure the defects
14 in Plaintiffs’ FAC. Indeed, as set forth below, Plaintiff's allegations affirmatively demonstrate
15 Plaintiffs’ causes of action against the demurring Defendants must be dismissed. Demurring
16 Defendants, therefore, respectfully request that the Court sustain their demurrer as to all causes of
17 action without leave to amend.
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MEMO. IN SUPP. OF DEMURRER PAGE IV
HOU 4845786.2
1 TABLE OF CONTENTS
2 MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1
3 I. FACTUAL BACKGROUND .......................................................................................... 1
II. II. ARGUMENT AND AUTHORITIES ..................................................................... 2
4
A. Plaintiffs fail to plead fraud/intentional misrepresentation/false promise
5 against the Moore Road LLCs with sufficient particularity........................ 3
6 B. Plaintiffs’ fail to state a claim as to their third and fifth cause of action
for violation of Cal. Bus. & Prof. Code § 17200, et seq against the
7 Moore Road LLCs, Paramont Capital, Paramont Woodside, Davis,
Wolfe, and Justesen ..................................................................................... 5
8
C. Plaintiffs fail to properly plead a cause of action for fraudulent
9 concealment................................................................................................. 7
10 1. Plaintiffs cannot establish the existence of any duty to disclose ............ 7
2. Plaintiffs failed to properly plead a fraud cause of action against
11
the demurring entity defendants ...................................................... 8
12 D. The Plaintiffs have failed to state a breach of fiduciary duty claim
because they have not alleged any facts creating a fiduciary duty ............. 9
13
E. Plaintiffs’ claim for breach of contract fails because it fails to establish a
14 valid contract existed and it lacks specificity ............................................ 10
15 F. Plaintiffs’ claim for breach of oral contract fails because it lacks
specificity and is barred by the statute of frauds ....................................... 12
16
G. Plaintiff’s fail to state a claim for quasi-contract/restitution/unjust
17 enrichment against the demurring Defendants .......................................... 12
H. Plaintiffs’ request for punitive damages fails ................................................... 14
18
III. CONCLUSION ........................................................................................................... 14
19
PROOF OF SERVICE .................................................................................................................. 16
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MEMO. IN SUPP. OF DEMURRER PAGE V
HOU 4845786.2
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4
Bank of the West v. Superior Court
5 (1992) 2 Cal.4th 1254 ............................................................................................................... 5
6 Barbara A. v. John G.
(1983) 145 Cal.App.3d 369....................................................................................................... 8
7
Beck v. State Farm Mutual Auto Ins. Co.
8 (1976) 54 Cal.App.3d 347....................................................................................................... 14
9 Bentley v. Mountain
10 (1942) 51 Cal.App.2d 95......................................................................................................... 10
11 Blank v. Kirwan
(1985) 39 Cal.3d 311 ................................................................................................................ 2
12
Blegen v. Superior Court,
13 125 Cal. App.3d 959 (1981).................................................................................................... 14
14 Bustamante v. Intuit, Inc.
15 (2006) 141 Cal.App.4th 199 ................................................................................................... 12
16 Cansino v. Bank of America
(2014) 224 Cal.App.4th 1462 ................................................................................................... 3
17
Contractor's Safety Ass'n v. California Compensation Ins. Co.
18 (1957) 48 Cal 2d 71 ................................................................................................................ 14
19 Crayton v. Super. Ct.
(1985) 165 Cal.App.3d 443....................................................................................................... 7
20
21 Cruz v. HomeBase
(2000) 83 Cal.App.4th 160 ....................................................................................................... 9
22
Eghtesad v. State Farm General Insurance Company
23 (2020) 51 Cal.App.5th 406 ................................................................................................... 2, 3
24 Feitelberg v. Credit Suisse First Boston, LLC
(2005) 134 Cal.App.4th 997 ..................................................................................................... 5
25
Feresi v. The Livery, LLC
26
(2014) 232 Cal.App.4th 419 ................................................................................................... 10
27
First Nationwide Savings v. Perry
28 (1992) 11 Cal.App.4th 1657 ................................................................................................... 13
MEMO. IN SUPP. OF DEMURRER PAGE VI
HOU 4845786.2
1 Goldrich v. Natural Y Surgical Specialties, Inc.,
25 Cal.App.4th 772 ................................................................................................................... 7
2
Goodman v. Kennedy
3
(1976) 18 Cal.3d 335 ................................................................................................................ 8
4
Granite Constr. Co. v. Super. Ct.
5 (1983) 149 Cal.App.3d 465....................................................................................................... 9
6 Hahn v. Mirda
(2007) 147 Cal.App.4th 740 ..................................................................................................... 8
7
Khoury v. Maly's of California, Inc.
8 (1993) 14 Cal.App.4th 612 ....................................................................................................... 6
9
Korea Supply Co. v. Lockheed Martin Corp.
10 (2003) 29 Cal.4th 1134 ............................................................................................................. 5
11 Kovich v. Paseo Del Mar Homeowners' Ass‘n
(1996) 41 Cal.App.4th 863 ....................................................................................................... 8
12
Lazar v. Superior Court
13 (1996) 12 Cal.4th 631 ............................................................................................................... 3
14
Levy v. State Farm Mutual Automobile Ins. Co.
15 (2007) 150 Cal.App.4th 1 ....................................................................................................... 10
16 LiMandri v. Judkins
(1997) 52 Cal.App.4th 326 ....................................................................................................... 8
17
Maganallez v. Hilltop Lending Corp.,
18 505 F. Supp. 2d 594 (2007)....................................................................................................... 5
19 Marzec v. California Public Employees Retirement System
20 (2015) 236 Cal.App.4th 889 ..................................................................................................... 9
21 Mendoza v. Continental Sales Co.
(2006) 140 Cal.App.4th 1395 ................................................................................................... 9
22
Oaks Management Corporation v. Superior Court
23 (2006) 145 Cal.App.4th 453 ................................................................................................... 10
24 Otworth v. Southern Pacific Transportation Company
(1985) 166 Cal.App.3d 452..................................................................................................... 11
25
26 Perdue v. Crocker National Bank
(1985) 38 Cal.3d 913 ................................................................................................................ 6
27
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MEMO. IN SUPP. OF DEMURRER PAGE VII
HOU 4845786.2
1 Ramirez v Wong
(2010) 188 Cal. App. 4th 1480 ................................................................................................. 2
2
Roberts v. Ball, Hunt, Hart, Brown & Baerwitz
3
(1976) 57 Cal.App.3d 104......................................................................................................... 7
4
Robinson Helicopter Co. v. Dana Corp.
5 (2004) 34 Cal. 4th 979 ............................................................................................................ 11
6 Scafidi v. West Loan & Building Co.
(1946) 72 Cal.App.2d 550......................................................................................................... 7
7
Smith v. Superior Court,
8 10 Cal.App.4th 1033 (1992).................................................................................................... 14
9
Sonora Diamond Corp. v. Superior Court,
10 83 Cal. App. 4th 523 (2000)...................................................................................................... 5
11 Stansfield v. Starkey
(1990) 220 Cal.App.3d 59......................................................................................................... 7
12
Stein v. Axis Ins. Co.,
13 10 Cal. App. 5th 673 (2017)...................................................................................................... 5
14
Stockton Mortgage, Inc. v. Tope
15 (2014) 233 Cal.App.4th 437 ................................................................................................... 12
16 Tarmann v. State Farm Mut. Auto. Ins. Co.
(1991) 2 Cal.App.4th 153 ................................................................................................. 3, 7, 9
17
Thompson v. Purdy
18 (1931) 117 Cal.App. 565......................................................................................................... 10
19 Wall Street Network, Ltd. v. New York Times Co.
20 (2008) 164 Cal.App.4th 1171 ................................................................................................. 10
21 Statutes
22 Cal. Bus. & Prof. Code § 17000 ........................................................................................... III, 1, 2
23 Cal. Bus. & Prof. Code § 17200 ............................................................................................. 2, 3, 5
24 Cal. Bus. & Prof. Code § 17203 ..................................................................................................... 5
25 Cal. Code Civ. Proc. § 430.10(e) .................................................................................................. 10
26 Cal. Code Civ. Proc. § 430.10(f)............................................................................................... 2, 10
27
Cal. Code Civ. Proc. § 1624(a) ..................................................................................................... 12
28
MEMO. IN SUPP. OF DEMURRER PAGE VIII
HOU 4845786.2
1 Cal. Code Civ. Proc. § 1624(a)(7) ................................................................................................ 12
2 Cal. Code Civ. Proc. § 3294(a) ..................................................................................................... 14
3 Cal. Code Civ. Proc. § 3294(c) ..................................................................................................... 14
4
Cal. Corp. Code § 17704.09 .......................................................................................................... 10
5
6
7
8
9
10
11
12
13
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MEMO. IN SUPP. OF DEMURRER PAGE IX
HOU 4845786.2
1 MEMORANDUM OF POINTS AND AUTHORITIES
2 I. FACTUAL BACKGROUND
3 Plaintiffs allege that they loaned money to SVRV due to fraud and other wrongful conduct
4 of its two managing members, Bragg and Kludt. (FAC ¶¶22-23.) All of the communications were
5 with Bragg and Kludt. All of the specific conduct on which Plaintiffs purport to base their claims
6 was committed by Bragg, Kludt, and SVRV. (Id. ¶¶37-143.) No specific conduct is alleged with
7 regard to the Moore Road LLCs. (Id.) Further, Plaintiffs do not allege facts establishing any
8 relationship, contractual or otherwise, with Paramont Capital, LLC, Paramont Woodside, LLC,
9 Gregory Davis, Kevin Wolfe, or Jason Justesen. (Id.)
10 Paramont Capital provides short-term capital to land developers. (FAC ¶31.) Paramont
11 Woodside was created for the specific purpose of investing in the Moore Road LLCs to purchase,
12 improve, and sell the properties located at 385 and 387 Moore Road, Woodside, California. (Id.
13 ¶30.) Davis is the manager of Paramont Woodside and the president of Paramont Capital. (Id. ¶27.)
14 SVRV entered into Operating Agreements with Paramont for each of the Moore Road
15 LLCs. (FAC ¶78.) The Operating Agreements listed SVRV and Paramont as the only members.
16 (Id. ¶79.) SVRV was listed as having contributed 20% of the initial capital of $250,000 for each
17 property, and Paramont as having contributed the remaining 80%, or $1,000,000 for each property.
18 (Id.) None of the Plaintiffs were listed as having any percentage interest in either entity nor were
19 the Plaintiffs, or their loans mentioned anywhere in the Operating Agreements that SVRV and
20 Paramont signed. (Id.) None of the Plaintiffs ever signed any purported Operating Agreement
21 associated with either of the Moore Road LLCs. (Id. ¶¶59, 99.) Plaintiffs allege they made loans to
22 SVRV so that SVRV could obtain a $2 million loan from Paramont Capital. (Id. ¶¶87, 88.) While
23 not stated explicitly, it appears Plaintiffs infer that their loans were used by SVRV as its capital
24 contributions.
25 On November 5, 2019, Paramont gave SVRV notice that SVRV breached the Operating
26 Agreements. (FAC ¶104.) SVRV failed to cure the breach. (Id. at ¶120.) Paramont did not become
27 the manager of each of the Moore Road LLCs until May 2020. (Id.) Paramont informed Bragg that
28
MEMO. IN SUPP. OF DEMURRER PAGE 1
HOU 4845786.2
1 “[n]either you nor SVRV has any further right to bind [the Moore Road LLCs] in any manner,
2 either orally or in writing.” (Id.)
3 Over the course of the following months, the Plaintiffs made multiple attempts to obtain
4 information about their loans from Bragg and Kludt. (FAC ¶¶100; 110.) Bragg and Kludt did not
5 provide the requested information, and prior to their bringing this lawsuit, refused to respond at all
6 to Plaintiffs. (Id. ¶154.) .
7 II. ARGUMENT AND AUTHORITIES
8 The California Supreme Court succinctly described the standard governing demurrers
9 in Blank v. Kirwan as follows:
In reviewing the sufficiency of a complaint against a general demurrer, we are
10 guided by long-settled rules. We treat the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law...
11 Further, we give the complaint a reasonable interpretation, reading it as a whole and
its parts in their context. When a demurrer is sustained, we determine whether the
12 complaint states facts sufficient to constitute a cause of action. And when it is
sustained without leave to amend, we decide whether there is a reasonable
13 possibility that the defect can be cured by amendment: if it can be, the trial court has
abused its discretion and we reverse; if not, there has been no abuse of discretion
14 and we affirm. The burden of proving such reasonable possibility is squarely on the
plaintiff.
15
(Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) (quotations and citations omitted). A court should
16
sustain a demurrer if a complaint fails to raise facts to meet each and every element of a claimed
17
cause of action. (Ramirez v Wong (2010) 188 Cal. App. 4th 1480, 1484.) A demurrer can also be
18
sustained where the pleading is so unclear that a defendant does not have sufficient information for
19
purposes of meaningfully responding. (Cod Civ. Proc. § 430.10, subd. (f).) If the complaint shows
20
on its face that there is no possibility of alleging facts under which recovery can be obtained, denial
21
of leave to amend is proper. (Eghtesad v. State Farm General Insurance Company (2020) 51
22
Cal.App.5th 406, 411–412.)
23
Plaintiffs asserted eleven causes of action:
24 (1) Fraud/Intentional Misrepresentation/False Promise (against Bragg, Kludt, SVRV,
and the Moore Road LLCs);
25 (2) Fraud/Intentional Misrepresentation/False Promise (against Bragg, Kludt, and
SVRV on behalf of Bob);
26 (3) Violation of Cal. Bus. & Prof. Code § 17200, et seq. (against Bragg, Kludt, SVRV,
and the Moore Road LLCs on behalf of Bob and the Arntsen Partnership);
27 (4) Violation of Cal. Bus. & Prof. Code § 17200, et seq. (against Bragg, Kludt, and
SVRV on behalf of Bob);
28
MEMO. IN SUPP. OF DEMURRER PAGE 2
HOU 4845786.2
1 (5) Violation of Cal. Bus. & Prof. Code § 17200, et seq. (against all Defendants on
behalf of all Plaintiffs);
2 (6) Fraudulent Concealment (against Bragg, Kludt, SVRV, and the Moore Road LLCs
on behalf of all Plaintiffs);
3 (7) Fraudulent Concealment (against all Defendants on behalf of all Plaintiffs);
(8) Breach of Fiduciary Duty (against all Defendants on behalf of all Plaintiffs);
4 (9) Breach of Contract (against all Defendants on behalf of all Plaintiffs);
(10) Breach of Oral Contract (against all Defendants on behalf of all Plaintiffs); and
5 (11) Quasi-Contract/Restitution/Unjust Enrichment (against all Defendants on behalf of
all Plaintiffs).
6
7 None of these causes of action are sufficient to support a legally viable cause of action
8 against the demurring Defendants. Because the FAC shows on its face that it is incapable of
9 amendment, and there is no possibility that Plaintiffs may allege facts under which recovery can be
10 obtained, leave to amend should be denied. (See Eghtesad, 51 Cal.App.5th at 411-412.)
11 A. Plaintiffs fail to plead fraud/intentional misrepresentation/false promise against the
12 Moore Road LLCs with sufficient particularity.
13 The elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3) intent to
14 induce reliance on the misrepresentation, (4) justifiable reliance on the misrepresentation, and (5)
15 resulting damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Promissory fraud is
16 merely a subspecies of fraud. (Id.) General and conclusory allegations are insufficient to properly
17 plead a fraud claim. (Id. at 645.) Lazar, 12 Cal. 4th at 645, 49 Cal.Rptr.2d 377, 909 P.2d 981. Fraud
18 must be pleaded with particularity, which demands that a plaintiff plead facts demonstrating “how,
19 when, where, to whom, and by what means the representations were tendered.” Id. Further, when
20 a plaintiff asserts fraud against an entity, the plaintiff must as to that entity “allege the names of the
21 persons who made the allegedly fraudulent representations, their authority to speak, to whom they
22 spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut.
23 Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157; Cansino v. Bank of America (2014) 224 Cal.App.4th
24 1462, 1468–1469.)
25 As to the Moore Road LLCs, the FAC fails to allege, among other things, the substance of
26 any alleged representations made by the Moore Road LLCs, who made them on behalf of the Moore
27 Road LLCs, when they were made, and to whom they were made. The FAC also does not allege
28 the required facts to specifically tie the alleged misrepresentations to either of the Moore Road
MEMO. IN SUPP. OF DEMURRER PAGE 3
HOU 4845786.2
1 LLCs. Instead, any wrongful conduct, however ambiguously alleged, is tied to Bragg and Kludt,
2 individually. For example:
“Kludt and Bragg lied to Bob about the SVRV Land project, which in fact
3 lost several hundred thousand dollars, including Bob’s entire investment. … If
Kludt and Bragg had been honest with Bob about the failure of the SVRV Land
4 project, neither he nor any of his family members would ever have invested another
dime with SVRV.” See FAC ¶38.
5
“Given his trust in Kludt and Bragg … Bob reached out to several of his
6 family members about investing in the Moore Road Project.” Id. at ¶40.
7 “Bragg informed Bob that because the proceeds from the SVRV Land
project were not yet available, he would need a collective $150,000 deposit from
8 Bob and his family members.” Id. at ¶41.
9 “Bragg scheduled an investor meeting for December 20, 2017.” … “On or
about that same day, the Arntsen Partnership invested $150,000 in the Moore Road
10 Project.” Id. at ¶¶44-45.
11 “In or around February 2018, Kludt prepared investment and operating
agreements for the limited liability companies that would become Moore Road
12 LLCs.” Id. at ¶53.
13 “On or around August 29, 2018, Bragg, CC’ing Kludt, contacted Bob,
Martha, and Mary to information them that ‘[w]e are ready to process the investor
14 agreements and need to verify the specifics for the agreements and how the amounts
will be allocated.’ … Bob agreed that Bragg could roll all of Bob’s proceeds from
15 the SVRV Land project into the Moore Road Project…” Id. at ¶68.
16 “[O]n or around March 19, 2019, Kludt and Bragg met with Bob, Martha,
and Mary and told them that they needed an additional $200,000 from them to keep
17 the Project going. … [Kludt and Bragg] said that Plaintiff could extend $200,000
in the form of short-term loans that would be promptly repaid with 12% interest.”
18 Id. at ¶87.
19 “That was a lie. … But because he trusted Kludt and Bragg, and was
unaware of their dealings with Paramont, Bob extended a loan of $100,000 for the
20 Project from his personal account on March 19, 2019. The Arntsen Partnership also
extended a loan of $100,000 on or about the same day.” Id. at ¶88.
21
“On or around May 10, 2019, SVRV repaid the $100,000 loan from the
22 Arntsen Partnership…But it returned to Bob only $3,641 of his $100,000 loan, and
further failed to pay interest.” Id. at ¶94.
23
On or around March 23, 2020, Bragg emailed Plaintiffs stating that “he was
24 seeking to refinance the loan for the Moore Road Project[,] but [would need the
financial support of all’ of the investors. Bragg warned that the investors ‘will need
25 to get a jump on this as the current loan [from Genesis] matures in June.’” Bragg
further stated that “given the demands of Genesis, ‘we w[ill] need financial help
26 from all of you for an indefinite period.’” Id. at ¶110.
27
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HOU 4845786.2
1 Although the FAC details representations made by Kludt and Bragg, it does not mention
2 any misrepresentations made by the Moore Road LLCs or plead facts with particularity to support
3 such allegations.1 Thus, demurrer is warranted on Plaintiff’s first cause of action for fraud as to the
4 Moore Road LLCs.
5 B. Plaintiffs’ fail to state a claim as to their third and fifth cause of action for violation of
6 Cal. Bus. & Prof. Code § 17200, et seq against the Moore Road LLCs, Paramont
7 Capital, Paramont Woodside, Davis, Wolfe, and Justesen.
8 Plaintiffs have not alleged a valid cause of action under § 17200, et seq for two independent
9 reasons: (1) the only remedy they seek of damages is not permissible under the statute; and (2) they
10 have failed to alleged specific facts constituting a claim under the statute.
11 First, the remedy of damages sought by Plaintiffs are not available under the statute. It is
12 Section 17203 that entitles a private plaintiff to assert a cause of action under the unfair business
13 practices act (i.e. § 17200, et seq). (Cal. Bus. & Prof. Code § 17203.) But damages are not available
14 under Section 17203. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.) The statute
15 only permits injunction relief and restitution. (Id.) In addition, a claim of restitution under Section
16 17203 is limited to compelling a defendant to return money it obtained through an unfair business
17 practice to the person who had an ownership interest in it. (Korea Supply Co. v. Lockheed Martin
18 Corp. (2003) 29 Cal.4th 1134, 1149.) To meet the requirements, the defendant from whom
19 restitution is sought must have obtained something to which it was not entitled. (Feitelberg v. Credit
20 Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1012.) Thus, even if a plaintiff can trace
21 funds that it gave to someone that committed an unfair practice, it cannot recover them from the
22 offender as part of a legitimate transaction.
23 Here, the Plaintiffs have clearly alleged solely a claim for damages for both its Section
24
25 1
It should be noted that at paragraphs 25 and 26 of the FAC, Plaintiffs conclusorily allege that the Moore Road LLCs
are the alter egos of Bragg and Kludt. However, the FAC fails to allege any facts to support that this is the case.
26 (See Stein v. Axis Ins. Co., 10 Cal. App. 5th 673, 679 (2017) (finding that conclusory allegations of alter ego status in
a breach of contract action are insufficient.); see also Maganallez v. Hilltop Lending Corp., 505 F. Supp. 2d 594, 607
27 (2007) (noting that “conclusory allegations of alter ego status will not survive a motion to dismiss.”); Sonora Diamond
Corp. v. Superior Court, 83 Cal. App. 4th 523, 539 (2000) (concluding that “[a]lter ego is an extreme remedy, sparingly
28 used.”)). Thus, the Court should sustain a demurrer as to this allegation.
MEMO. IN SUPP. OF DEMURRER PAGE 5
HOU 4845786.2
1 17200 claims, which is not legally permissible. (FAC. ¶¶ 185, 186, 187, 191, 207, 208.) Further,
2 the allegations are not sufficient to allege a claim for restitution because there are no facts indicating
3 that any of the demurring Defendants obtained funds from the Plaintiffs or obtained any funds to
4 which they were not entitled.
5 Second, the FAC does not properly allege the elements of an unfair business practice claim.
6 A plaintiff alleging unfair business practices under these statutes must state with reasonable
7 particularity the facts supporting the statutory elements of the violation. (Perdue v. Crocker
8 National Bank (1985) 38 Cal.3d 913, 929–930; Khoury v. Maly's of California, Inc. (1993) 14
9 Cal.App.4th 612, 619.)
10 Plaintiffs’ FAC does not identify a particular section of the unfair business practices
11 statutory scheme that Paramont Capital, Paramont Woodside, Davis, Wolfe, Justesen, or the Moore
12 Road LLCs supposedly violated. Also, the FAC does not describe with any reasonable particularity
13 the facts supporting the elements of any violation against the demurring Defendants. Instead, the
14 Plaintiffs allege misrepresentations, which were clearly made by Bragg, Kludt, and SVRV, and
15 cannot be attributed to the demurring Defendants, see supra, II.A. Again, Plaintiffs do not allege
16 any particular conduct committed by the demurring Defendants. Similarly, the FAC does not
17 describe any facts supporting statutory violations against Paramont Capital, Paramont Woodside,
18 Davis, Wolfe, Justesen, or the Moore Road LLCs. The Plaintiffs assert that each of the demurring
19 Defendants had a fiduciary duty to the Plaintiffs and that they allegedly concealed facts from the
20 Plaintiffs that should have been disclosed. (FAC ¶¶ 203-207.) And yet, Plaintiffs do not explain
21 how the supposed fiduciary duty or duty to disclose came to exist. Indeed, according to the FAC,
22 Plaintiffs did not sign the “Effective Operating Agreements” or the “Unapproved Operating
23 Agreements,” and simply gave Bragg, Kludt, and/or SVRV money based on their long-standing
24 relationship and trust. (Id. at ¶¶ 37, 40 59, 88, 99). Plaintiffs are attempting to make a connection
25 between themselves and the demurring Defendants, however, they were essentially strangers to
26 each other. The law does not support a fiduciary duty under such circumstances.
27 Thus, the demurrer should be sustained as to the third and fifth causes of action. Because
28
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HOU 4845786.2
1 the factual allegations cannot be re-plead to state a viable claim, Plaintiffs should not be afforded
2 an opportunity to amend.
3 C. Plaintiffs fail to properly plead a cause of action for fraudulent concealment.
4 It is well settled that every element of a cause of action for fraud must be alleged in the
5 proper manner and the facts constituting the fraud must be alleged with sufficient specificity to
6 allow the defendant to understand fully the nature of the charges being made. (Tarmann, 2
7 Cal.App.4th at 157; Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73; Roberts v. Ball, Hunt,
8 Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) The rationale for the strict requirement
9 of pleading is not merely notice to the defendant, but because the allegations of fraud involve a
10 serious attack on character, fairness to the defendant demands that the defendant should receive the
11 fullest possible details of the charge in order to prepare an adequate defense. (Stansfield, 220
12 Cal.App.3d at 73.) It is essential that the facts and circumstances which constitute the fraud be set
13 out clearly, concisely and with sufficient particularity to apprise the opposite party of what he is
14 called upon to answer. (Scafidi v. West Loan & Building Co. (1946) 72 Cal.App.2d 550, 558;
15 Goldrich v. Natural Y Surgical Specialties, Inc., 25 Cal.App.4th 772, 782 (finding that “[t]o
16 withstand a demurrer, the facts constituting every element of fraud most be alleged with
17 particularity, and the claim cannot be salvaged by references to the general policy favoring liberal
18 construction of pleadings.”).)
19 To state a cause of action for fraudulent concealment, a plaintiff must allege: (1) the
20 defendant concealed or suppressed a material fact; (2) the defendant was under a duty to disclose
21 the fact to the plaintiff; (3) the defendant intentionally concealed or suppressed the fact with the
22 intent to defraud the plaintiff; (4) the plaintiff must have been unaware of the fact and would not
23 have acted as he did if he had known of the concealed or suppressed fact; and (5) as a result of the
24 concealment or suppression of the fact, the plaintiff must have sustained damage. (See Marketing
25 West, Inc. v. Sanyo Fisher (U.S.A. Corp.) (1992) 6 Cal.App.4th 603, 612-613.)
26 1. Plaintiffs cannot establish the existence of any duty to disclose.
27 The mere failure to disclose, absent a duty to disclose, does not constitute fraud. (Crayton
28
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HOU 4845786.2
1 v. Super. Ct. (1985) 165 Cal.App.3d 443, 451.) There is no such duty without some relationship
2 between the parties; thus, between complete strangers there is no duty of disclosure. (LiMandri v.
3 Judkins (1997) 52 Cal.App.4th 326, 336-337.) Courts routinely grant demurrers
4 to fraudulent concealment claims where a plaintiff fails to allege facts giving rise to a duty to
5 disclose. (See, e.g., Goodman v. Kennedy, (1976) 18 Cal.3d 335, 347 (affirming demurrer and
6 noting that mere conclusory allegations are insufficient to demonstrate a confidential relationship
7 between the parties); see also, LiMandri, 52 Cal.App.4th at 336-337 (affirming demurrer absent
8 allegations of a transaction or relationship between plaintiff and defendant, such as that between a
9 buyer and seller or a doctor and patient); Kovich v. Paseo Del Mar Homeowners' Ass‘n (1996) 41
10 Cal.App.4th 863, 866-867.)
11 Here, Plaintiffs cannot allege the existence of a fiduciary relationship in good faith because,
12 in fact, no legal relationship ever existed between demurring Defendants and Plaintiffs that could
13 give rise to such a duty. (See, Barbara A. v. John G. (1983) 145 Cal.App.3d 369, 382-383
14 (describing fiduciary relationship as a recognized legal relationship such as guardian and ward,
15 trustee and beneficiary, principal and agent, or attorney and client).) Since Plaintiffs were not a
16 party to a single transaction with demurring Defendants, there was no duty to disclose owed by
17 demurring Defendants to Plaintiff, see infra, II.D. (See, Hahn v. Mirda (2007) 147 Cal.App.4th
18 740, 745 (dismissing fraudulent concealment claim because doctors only owed duty to patient - not
19 patient's spouse).) Indeed, Plaintiffs have not alleged that demurring Defendants had a duty to
20 disclose any information to them nor have they illustrated that an actual fiduciary relationship
21 existed and/or was formed. (FAC ¶¶223-231). Merely reciting that a “fiduciary relationship”
22 existed, does not create one. Because demurring Defendants owed no duty of disclosure to
23 Plaintiffs, the demurrer should be sustained.
24 2. Plaintiffs failed to properly plead a fraud cause of action against the demurring
25 entity defendants.
26 The requirement for specificity of pleadings in a fraud action against an entity, such as
27 several of the demurring Defendants here, requires that the Plaintiffs allege (1) the names of the
28
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HOU 4845786.2
1 persons who made the allegedly fraudulent representations; (2) their authority to speak; (3) to whom
2 they spoke; (4) what they said or wrote; and (5) and when it was said or written. (Tarmann, 2
3 Cal.App.4th at 157.) “Corporations are legal entities which do not have minds capable of
4 recklessness, wickedness, or intent to injure or deceive.” (Cruz v. HomeBase (2000) 83 Cal.App.4th
5 160, 167.) Only through their agents can form an entity form intent and commit tortious
6 acts. (Granite Constr. Co. v. Super. Ct. (1983) 149 Cal.App.3d 465, 472.)
7 Plaintiffs’ FAC does not contain the specificity required to plead a cause of action for fraud
8 against demurring Defendants, because it does not contain any specific allegations of fraud
9 committed by demurring Defendants. Rather, the FAC merely contains broad allegations levied at
10 all the defendants in this case. Blanket allegations of fraud, of whatever type, made globally against
11 different defendants, with different corporate officers, are not specific in any way shape or form to
12 demurring Defendants. Plaintiffs’ FAC does not mention which corporate agent made the
13 fraudulent representation, who they spoke to, what they said, or when it was said. (See generally
14 FAC.) Thus, the demurrer to Plaintiffs’ sixth and seventh causes of action should be sustained.
15 D. The Plaintiffs have failed to state a breach of fiduciary duty claim because they have
16 not alleged any facts creating a fiduciary duty.
17 The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary
18 relationship, (2) its breach, and (3) damage proximately caused by that breach. (Mendoza v.
19 Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.) Whether a fiduciary duty exists is a
20 question of law. (Marzec v. California Public Employees Retirement System (2015) 236
21 Cal.App.4th 889, 915.)
22 Plaintiffs assert that Paramont Capital, Paramont Woodside, Davis, Wolfe, Justesen, and
23 the Moore Road LLCs “held a fiduciary position of trust with respect to Plaintiffs” (FAC ¶ 233.)
24 However, the FAC does not actually allege any facts to support this conclusory assertion. There are
25 no allegations even identifying any interactions between Plaintiffs and Paramont Capital, Paramont
26 Woodside, Davis, Wolfe, Justesen, or the Moore Road LLC’s, much less interactions establishing
27 a fiduciary duty. The FAC asserts that the Plaintiffs loaned money to SVRV, but such a loan does
28
MEMO. IN SUPP. OF DEMURRER
Preview
1 Brian Zimmerman (admitted pro hac vice) 2 Nicholas Reisch (admitted pro hac vice) Jessica E. Chong (SBN 317869) 3 SPENCER FANE LLP 3040 Post Oak Blvd., Suite 1400 4 Houston, TX 77056 (713) 552-1234 telephone 5 Ernesto F. Aldover (SBN 157625) 6 RETZ & ALDOVER, LLP 2550 Via Tejon, Suite 3A 7 Palos Verdes Estates, California 90274 (310) 540-9800 telephone 8 Attorneys for Defendants 9 Gregory J. Davis, Kevin Wolfe, Jason Justesen, Paramont Woodside, LLC, Paramont Capital, LLC, 10 SVRV 385 Moore, LLC, and SVRV 387 Moore, LLC 11 SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 COUNTY OF SAN MATEO 13 Robert Arntsen; Mary Lee; Arntsen Family Case No. 22-CIV-01148 14 Partnership, LP; and Brian Christopher Dunn Custodianship; NOTICE OF DEMURRER AND 15 DEFENDANTS SVRV 385 MOORE, LLC, Plaintiffs, SVRV 387 MOORE, LLC, GREGORY J. 16 DAVIS, KEVIN WOLFE, JASON -vs- JUSTESEN, PARAMONT WOODSIDE, 17 LLC, PARAMONT CAPITAL, LLC’S David M. Bragg; Kurtis Stuart Kludt; Silicon DEMURRER TO PLAINTIFFS’ FIRST 18 Valley Real Ventures, LLC; SVRV 385 Moore, AMENDED COMPLAINT LLC; SVRV 387 Moore, LLC; Gregory J. 19 Davis; Paramont Woodside, LLC; and [Declaration of Jessica E. Chong, Esq., and Paramont Capital, LLC; Notice of Motion to Strike and Defendants 20 SVRV 385 Moore, LLC, SVRV 387 Moore, Defendants. LLC, Gregory J. Davis, Kevin Wolfe, Jason 21 Justesen, Paramont Woodside, LLC, Paramont Capital, LLC’s Motion to Strike 22 filed concurrently herewith] 23 [Hon. Robert D. Foiles] 24 Date: May 26, 2023 25 Time: 9:00 AM Dept.: 21 26 27 28 MEMO. IN SUPP. OF DEMURRER PAGE I 1 TO THE COURT, PLAINTIFFS, AND THEIR ATTORNEYS OF RECORD: 2 PLEASE TAKE NOTICE that on May 26, 2023 at 9:00 a.m. or as soon thereafter as the 3 matter may be heard in Department 21 of the above-entitled court, located at 800 North Humboldt 4 Street, San Mateo, California 94401, Defendants SVRV 385 Moore, LLC, SVRV 387 Moore, LLC, 5 Gregory J. Davis, Keving Wolfe, Jason Justesen, Paramont Woodside, LLC, and Paramont Capital, 6 LLC, hereby moves this Court for an order granting their Demurrer to Plaintiff’s First Amended 7 Complaint. This Demurrer is based upon this notice, the memorandum of points and authorities, 8 the declaration of Jessica E. Chong, Esq., filed concurrently with this motion, the pleadings and 9 records contained in the file, and any oral documentary evidence presented to the court at the time 10 of the hearing. 11 Dated: March 21, 2023 SPENCER FANE LLP 12 13 By: /s/ Jessica E. Chong Brian Zimmerman (admitted pro hac vice) 14 Nicholas Reisch (admitted pro hac vice) Jessica E. Chong (SBN 317869) 15 SPENCER FANE LLP 3040 Post Oak Blvd., Suite 1400 16 Houston, TX 77056 17 and 18 Ernesto F. Aldover, Esq. RETZ & ALDOVER, LLP 19 2550 Via Tejon, Suite 3A Palos Verdes Estates, CA 90274 20 Attorneys for Defendants SVRV 385 Moore LLC, SVRV 387 LLC Moore LLC Gregory 21 J. Davis; Kevin Wolfe; Jason Justesen; Paramont Woodside, LLC; and Paramont 22 Capital, LLC 23 24 25 26 27 28 MEMO. IN SUPP. OF DEMURRER PAGE II HOU 4845786.2 1 SUMMARY OF ARGUMENT 2 According to Plaintiffs’ First Amended Complaint (“FAC”), Plaintiffs loaned money to 3 defendant Silicon Valley Real Ventures, LLC (SVRV). They did so based on alleged fraudulent 4 representations made by two of SVRV’s members, Bragg and Kludt. However, Plaintiffs attempt 5 to expand their claims to other defendants: SVRV 385 Moore LLC, SVRV 387 LLC Moore LLC 6 (collectively “Moore Road LLCs”), Gregory J. Davis, Kevin Wolfe, Jason Justesen, Paramont 7 Woodside LLC, and Paramont Capital, LLC. 8 Based on the FAC, the only connection between Plaintiffs and the Moore Road LLCs is a 9 tangential one: SVRV was a member in both entities. But that connection is not enough to support 10 Plaintiffs’ claims against those entities. There is even less connection between Plaintiffs and Davis, 11 Wolfe, Justesen, Paramont Woodside, and Paramont Capital. None of them ever had any 12 communications or relationship with the Plaintiffs and the FAC does not assert otherwise. 13 The Moore Road LLCs, Davis, Wolfe, Justesen, Paramont Woodside, and Paramont Capital 14 (collectively “demurring Defendants”) all assert a demurrer to Plaintiffs’ FAC because it does not 15 allege sufficient facts meeting each element of any of the nine causes of action (of eleven total) 16 asserted against the demurring Defendants in the FAC. 17 As to Plaintiffs’ fraud claims against the Moore Road LLCs, the FAC is devoid of factual 18 allegations with the requisite particularity, including how, when, where, to whom, and by what 19 means any alleged representations were made by Moore Road LLCs. Plaintiffs’ third and fifth 20 causes of action for violations of the Cal. Bus. and Prof. Code Section 17000 et seq., also fail 21 because that statute does not permit the remedy of damages, the only remedy sought by Plaintiffs. 22 In addition, as to the Section 17000 claims, Plaintiffs have not, and cannot plead specific facts that 23 support such a claim. The FAC does not identify a particular section of the statutory scheme which 24 Defendants violated or assert facts satisfying the elements of an unfair practices claim. 25 Plaintiff’s sixth and seventh causes of action for fraudulent concealment fails because they 26 (1) have not established that demurring Defendants were in a fiduciary capacity to disclose any 27 information and (2) have not properly plead a fraud claim against the entity defendants. 28 MEMO. IN SUPP. OF DEMURRER PAGE III HOU 4845786.2 1 Plaintiffs’ eighth cause of action for breach of fiduciary duty fails because Plaintiffs fail to 2 allege any facts that would establish a fiduciary relationship as to the demurring Defendants. 3 Plaintiffs’ ninth cause of action for breach of contract fails because (1) it does not state facts 4 sufficient to constitute a cause of action and (2) it is fatally uncertain. Indeed, Plaintiffs have not 5 alleged the bare minimum – that there was a valid contract between Plaintiffs and the demurring 6 Defendants. 7 Plaintiff’s tenth cause of action for breach of oral contract fails because (i) the FAC lacks 8 any specificity to establish that an oral contact existed between any of the Plaintiffs and the 9 demurring Defendants; and (ii) the claim is barred by the statute of frauds. Plaintiff’s eleventh cause 10 of action for quasi contract, restitution, and unjust enrichment also fails because Plaintiffs’ have 11 not alleged sufficient facts as to the demurring Defendants to support such a claim. 12 For these reasons, which are explained more fully below, the demurrer to each cause of 13 action in the FAC should be sustained. Moreover, a pleadings amendment cannot cure the defects 14 in Plaintiffs’ FAC. Indeed, as set forth below, Plaintiff's allegations affirmatively demonstrate 15 Plaintiffs’ causes of action against the demurring Defendants must be dismissed. Demurring 16 Defendants, therefore, respectfully request that the Court sustain their demurrer as to all causes of 17 action without leave to amend. 18 19 20 21 22 23 24 25 26 27 28 MEMO. IN SUPP. OF DEMURRER PAGE IV HOU 4845786.2 1 TABLE OF CONTENTS 2 MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1 3 I. FACTUAL BACKGROUND .......................................................................................... 1 II. II. ARGUMENT AND AUTHORITIES ..................................................................... 2 4 A. Plaintiffs fail to plead fraud/intentional misrepresentation/false promise 5 against the Moore Road LLCs with sufficient particularity........................ 3 6 B. Plaintiffs’ fail to state a claim as to their third and fifth cause of action for violation of Cal. Bus. & Prof. Code § 17200, et seq against the 7 Moore Road LLCs, Paramont Capital, Paramont Woodside, Davis, Wolfe, and Justesen ..................................................................................... 5 8 C. Plaintiffs fail to properly plead a cause of action for fraudulent 9 concealment................................................................................................. 7 10 1. Plaintiffs cannot establish the existence of any duty to disclose ............ 7 2. Plaintiffs failed to properly plead a fraud cause of action against 11 the demurring entity defendants ...................................................... 8 12 D. The Plaintiffs have failed to state a breach of fiduciary duty claim because they have not alleged any facts creating a fiduciary duty ............. 9 13 E. Plaintiffs’ claim for breach of contract fails because it fails to establish a 14 valid contract existed and it lacks specificity ............................................ 10 15 F. Plaintiffs’ claim for breach of oral contract fails because it lacks specificity and is barred by the statute of frauds ....................................... 12 16 G. Plaintiff’s fail to state a claim for quasi-contract/restitution/unjust 17 enrichment against the demurring Defendants .......................................... 12 H. Plaintiffs’ request for punitive damages fails ................................................... 14 18 III. CONCLUSION ........................................................................................................... 14 19 PROOF OF SERVICE .................................................................................................................. 16 20 21 22 23 24 25 26 27 28 MEMO. IN SUPP. OF DEMURRER PAGE V HOU 4845786.2 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Bank of the West v. Superior Court 5 (1992) 2 Cal.4th 1254 ............................................................................................................... 5 6 Barbara A. v. John G. (1983) 145 Cal.App.3d 369....................................................................................................... 8 7 Beck v. State Farm Mutual Auto Ins. Co. 8 (1976) 54 Cal.App.3d 347....................................................................................................... 14 9 Bentley v. Mountain 10 (1942) 51 Cal.App.2d 95......................................................................................................... 10 11 Blank v. Kirwan (1985) 39 Cal.3d 311 ................................................................................................................ 2 12 Blegen v. Superior Court, 13 125 Cal. App.3d 959 (1981).................................................................................................... 14 14 Bustamante v. Intuit, Inc. 15 (2006) 141 Cal.App.4th 199 ................................................................................................... 12 16 Cansino v. Bank of America (2014) 224 Cal.App.4th 1462 ................................................................................................... 3 17 Contractor's Safety Ass'n v. California Compensation Ins. Co. 18 (1957) 48 Cal 2d 71 ................................................................................................................ 14 19 Crayton v. Super. Ct. (1985) 165 Cal.App.3d 443....................................................................................................... 7 20 21 Cruz v. HomeBase (2000) 83 Cal.App.4th 160 ....................................................................................................... 9 22 Eghtesad v. State Farm General Insurance Company 23 (2020) 51 Cal.App.5th 406 ................................................................................................... 2, 3 24 Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997 ..................................................................................................... 5 25 Feresi v. The Livery, LLC 26 (2014) 232 Cal.App.4th 419 ................................................................................................... 10 27 First Nationwide Savings v. Perry 28 (1992) 11 Cal.App.4th 1657 ................................................................................................... 13 MEMO. IN SUPP. OF DEMURRER PAGE VI HOU 4845786.2 1 Goldrich v. Natural Y Surgical Specialties, Inc., 25 Cal.App.4th 772 ................................................................................................................... 7 2 Goodman v. Kennedy 3 (1976) 18 Cal.3d 335 ................................................................................................................ 8 4 Granite Constr. Co. v. Super. Ct. 5 (1983) 149 Cal.App.3d 465....................................................................................................... 9 6 Hahn v. Mirda (2007) 147 Cal.App.4th 740 ..................................................................................................... 8 7 Khoury v. Maly's of California, Inc. 8 (1993) 14 Cal.App.4th 612 ....................................................................................................... 6 9 Korea Supply Co. v. Lockheed Martin Corp. 10 (2003) 29 Cal.4th 1134 ............................................................................................................. 5 11 Kovich v. Paseo Del Mar Homeowners' Ass‘n (1996) 41 Cal.App.4th 863 ....................................................................................................... 8 12 Lazar v. Superior Court 13 (1996) 12 Cal.4th 631 ............................................................................................................... 3 14 Levy v. State Farm Mutual Automobile Ins. Co. 15 (2007) 150 Cal.App.4th 1 ....................................................................................................... 10 16 LiMandri v. Judkins (1997) 52 Cal.App.4th 326 ....................................................................................................... 8 17 Maganallez v. Hilltop Lending Corp., 18 505 F. Supp. 2d 594 (2007)....................................................................................................... 5 19 Marzec v. California Public Employees Retirement System 20 (2015) 236 Cal.App.4th 889 ..................................................................................................... 9 21 Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395 ................................................................................................... 9 22 Oaks Management Corporation v. Superior Court 23 (2006) 145 Cal.App.4th 453 ................................................................................................... 10 24 Otworth v. Southern Pacific Transportation Company (1985) 166 Cal.App.3d 452..................................................................................................... 11 25 26 Perdue v. Crocker National Bank (1985) 38 Cal.3d 913 ................................................................................................................ 6 27 28 MEMO. IN SUPP. OF DEMURRER PAGE VII HOU 4845786.2 1 Ramirez v Wong (2010) 188 Cal. App. 4th 1480 ................................................................................................. 2 2 Roberts v. Ball, Hunt, Hart, Brown & Baerwitz 3 (1976) 57 Cal.App.3d 104......................................................................................................... 7 4 Robinson Helicopter Co. v. Dana Corp. 5 (2004) 34 Cal. 4th 979 ............................................................................................................ 11 6 Scafidi v. West Loan & Building Co. (1946) 72 Cal.App.2d 550......................................................................................................... 7 7 Smith v. Superior Court, 8 10 Cal.App.4th 1033 (1992).................................................................................................... 14 9 Sonora Diamond Corp. v. Superior Court, 10 83 Cal. App. 4th 523 (2000)...................................................................................................... 5 11 Stansfield v. Starkey (1990) 220 Cal.App.3d 59......................................................................................................... 7 12 Stein v. Axis Ins. Co., 13 10 Cal. App. 5th 673 (2017)...................................................................................................... 5 14 Stockton Mortgage, Inc. v. Tope 15 (2014) 233 Cal.App.4th 437 ................................................................................................... 12 16 Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153 ................................................................................................. 3, 7, 9 17 Thompson v. Purdy 18 (1931) 117 Cal.App. 565......................................................................................................... 10 19 Wall Street Network, Ltd. v. New York Times Co. 20 (2008) 164 Cal.App.4th 1171 ................................................................................................. 10 21 Statutes 22 Cal. Bus. & Prof. Code § 17000 ........................................................................................... III, 1, 2 23 Cal. Bus. & Prof. Code § 17200 ............................................................................................. 2, 3, 5 24 Cal. Bus. & Prof. Code § 17203 ..................................................................................................... 5 25 Cal. Code Civ. Proc. § 430.10(e) .................................................................................................. 10 26 Cal. Code Civ. Proc. § 430.10(f)............................................................................................... 2, 10 27 Cal. Code Civ. Proc. § 1624(a) ..................................................................................................... 12 28 MEMO. IN SUPP. OF DEMURRER PAGE VIII HOU 4845786.2 1 Cal. Code Civ. Proc. § 1624(a)(7) ................................................................................................ 12 2 Cal. Code Civ. Proc. § 3294(a) ..................................................................................................... 14 3 Cal. Code Civ. Proc. § 3294(c) ..................................................................................................... 14 4 Cal. Corp. Code § 17704.09 .......................................................................................................... 10 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMO. IN SUPP. OF DEMURRER PAGE IX HOU 4845786.2 1 MEMORANDUM OF POINTS AND AUTHORITIES 2 I. FACTUAL BACKGROUND 3 Plaintiffs allege that they loaned money to SVRV due to fraud and other wrongful conduct 4 of its two managing members, Bragg and Kludt. (FAC ¶¶22-23.) All of the communications were 5 with Bragg and Kludt. All of the specific conduct on which Plaintiffs purport to base their claims 6 was committed by Bragg, Kludt, and SVRV. (Id. ¶¶37-143.) No specific conduct is alleged with 7 regard to the Moore Road LLCs. (Id.) Further, Plaintiffs do not allege facts establishing any 8 relationship, contractual or otherwise, with Paramont Capital, LLC, Paramont Woodside, LLC, 9 Gregory Davis, Kevin Wolfe, or Jason Justesen. (Id.) 10 Paramont Capital provides short-term capital to land developers. (FAC ¶31.) Paramont 11 Woodside was created for the specific purpose of investing in the Moore Road LLCs to purchase, 12 improve, and sell the properties located at 385 and 387 Moore Road, Woodside, California. (Id. 13 ¶30.) Davis is the manager of Paramont Woodside and the president of Paramont Capital. (Id. ¶27.) 14 SVRV entered into Operating Agreements with Paramont for each of the Moore Road 15 LLCs. (FAC ¶78.) The Operating Agreements listed SVRV and Paramont as the only members. 16 (Id. ¶79.) SVRV was listed as having contributed 20% of the initial capital of $250,000 for each 17 property, and Paramont as having contributed the remaining 80%, or $1,000,000 for each property. 18 (Id.) None of the Plaintiffs were listed as having any percentage interest in either entity nor were 19 the Plaintiffs, or their loans mentioned anywhere in the Operating Agreements that SVRV and 20 Paramont signed. (Id.) None of the Plaintiffs ever signed any purported Operating Agreement 21 associated with either of the Moore Road LLCs. (Id. ¶¶59, 99.) Plaintiffs allege they made loans to 22 SVRV so that SVRV could obtain a $2 million loan from Paramont Capital. (Id. ¶¶87, 88.) While 23 not stated explicitly, it appears Plaintiffs infer that their loans were used by SVRV as its capital 24 contributions. 25 On November 5, 2019, Paramont gave SVRV notice that SVRV breached the Operating 26 Agreements. (FAC ¶104.) SVRV failed to cure the breach. (Id. at ¶120.) Paramont did not become 27 the manager of each of the Moore Road LLCs until May 2020. (Id.) Paramont informed Bragg that 28 MEMO. IN SUPP. OF DEMURRER PAGE 1 HOU 4845786.2 1 “[n]either you nor SVRV has any further right to bind [the Moore Road LLCs] in any manner, 2 either orally or in writing.” (Id.) 3 Over the course of the following months, the Plaintiffs made multiple attempts to obtain 4 information about their loans from Bragg and Kludt. (FAC ¶¶100; 110.) Bragg and Kludt did not 5 provide the requested information, and prior to their bringing this lawsuit, refused to respond at all 6 to Plaintiffs. (Id. ¶154.) . 7 II. ARGUMENT AND AUTHORITIES 8 The California Supreme Court succinctly described the standard governing demurrers 9 in Blank v. Kirwan as follows: In reviewing the sufficiency of a complaint against a general demurrer, we are 10 guided by long-settled rules. We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law... 11 Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. When a demurrer is sustained, we determine whether the 12 complaint states facts sufficient to constitute a cause of action. And when it is sustained without leave to amend, we decide whether there is a reasonable 13 possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion 14 and we affirm. The burden of proving such reasonable possibility is squarely on the plaintiff. 15 (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) (quotations and citations omitted). A court should 16 sustain a demurrer if a complaint fails to raise facts to meet each and every element of a claimed 17 cause of action. (Ramirez v Wong (2010) 188 Cal. App. 4th 1480, 1484.) A demurrer can also be 18 sustained where the pleading is so unclear that a defendant does not have sufficient information for 19 purposes of meaningfully responding. (Cod Civ. Proc. § 430.10, subd. (f).) If the complaint shows 20 on its face that there is no possibility of alleging facts under which recovery can be obtained, denial 21 of leave to amend is proper. (Eghtesad v. State Farm General Insurance Company (2020) 51 22 Cal.App.5th 406, 411–412.) 23 Plaintiffs asserted eleven causes of action: 24 (1) Fraud/Intentional Misrepresentation/False Promise (against Bragg, Kludt, SVRV, and the Moore Road LLCs); 25 (2) Fraud/Intentional Misrepresentation/False Promise (against Bragg, Kludt, and SVRV on behalf of Bob); 26 (3) Violation of Cal. Bus. & Prof. Code § 17200, et seq. (against Bragg, Kludt, SVRV, and the Moore Road LLCs on behalf of Bob and the Arntsen Partnership); 27 (4) Violation of Cal. Bus. & Prof. Code § 17200, et seq. (against Bragg, Kludt, and SVRV on behalf of Bob); 28 MEMO. IN SUPP. OF DEMURRER PAGE 2 HOU 4845786.2 1 (5) Violation of Cal. Bus. & Prof. Code § 17200, et seq. (against all Defendants on behalf of all Plaintiffs); 2 (6) Fraudulent Concealment (against Bragg, Kludt, SVRV, and the Moore Road LLCs on behalf of all Plaintiffs); 3 (7) Fraudulent Concealment (against all Defendants on behalf of all Plaintiffs); (8) Breach of Fiduciary Duty (against all Defendants on behalf of all Plaintiffs); 4 (9) Breach of Contract (against all Defendants on behalf of all Plaintiffs); (10) Breach of Oral Contract (against all Defendants on behalf of all Plaintiffs); and 5 (11) Quasi-Contract/Restitution/Unjust Enrichment (against all Defendants on behalf of all Plaintiffs). 6 7 None of these causes of action are sufficient to support a legally viable cause of action 8 against the demurring Defendants. Because the FAC shows on its face that it is incapable of 9 amendment, and there is no possibility that Plaintiffs may allege facts under which recovery can be 10 obtained, leave to amend should be denied. (See Eghtesad, 51 Cal.App.5th at 411-412.) 11 A. Plaintiffs fail to plead fraud/intentional misrepresentation/false promise against the 12 Moore Road LLCs with sufficient particularity. 13 The elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3) intent to 14 induce reliance on the misrepresentation, (4) justifiable reliance on the misrepresentation, and (5) 15 resulting damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Promissory fraud is 16 merely a subspecies of fraud. (Id.) General and conclusory allegations are insufficient to properly 17 plead a fraud claim. (Id. at 645.) Lazar, 12 Cal. 4th at 645, 49 Cal.Rptr.2d 377, 909 P.2d 981. Fraud 18 must be pleaded with particularity, which demands that a plaintiff plead facts demonstrating “how, 19 when, where, to whom, and by what means the representations were tendered.” Id. Further, when 20 a plaintiff asserts fraud against an entity, the plaintiff must as to that entity “allege the names of the 21 persons who made the allegedly fraudulent representations, their authority to speak, to whom they 22 spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. 23 Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157; Cansino v. Bank of America (2014) 224 Cal.App.4th 24 1462, 1468–1469.) 25 As to the Moore Road LLCs, the FAC fails to allege, among other things, the substance of 26 any alleged representations made by the Moore Road LLCs, who made them on behalf of the Moore 27 Road LLCs, when they were made, and to whom they were made. The FAC also does not allege 28 the required facts to specifically tie the alleged misrepresentations to either of the Moore Road MEMO. IN SUPP. OF DEMURRER PAGE 3 HOU 4845786.2 1 LLCs. Instead, any wrongful conduct, however ambiguously alleged, is tied to Bragg and Kludt, 2 individually. For example: “Kludt and Bragg lied to Bob about the SVRV Land project, which in fact 3 lost several hundred thousand dollars, including Bob’s entire investment. … If Kludt and Bragg had been honest with Bob about the failure of the SVRV Land 4 project, neither he nor any of his family members would ever have invested another dime with SVRV.” See FAC ¶38. 5 “Given his trust in Kludt and Bragg … Bob reached out to several of his 6 family members about investing in the Moore Road Project.” Id. at ¶40. 7 “Bragg informed Bob that because the proceeds from the SVRV Land project were not yet available, he would need a collective $150,000 deposit from 8 Bob and his family members.” Id. at ¶41. 9 “Bragg scheduled an investor meeting for December 20, 2017.” … “On or about that same day, the Arntsen Partnership invested $150,000 in the Moore Road 10 Project.” Id. at ¶¶44-45. 11 “In or around February 2018, Kludt prepared investment and operating agreements for the limited liability companies that would become Moore Road 12 LLCs.” Id. at ¶53. 13 “On or around August 29, 2018, Bragg, CC’ing Kludt, contacted Bob, Martha, and Mary to information them that ‘[w]e are ready to process the investor 14 agreements and need to verify the specifics for the agreements and how the amounts will be allocated.’ … Bob agreed that Bragg could roll all of Bob’s proceeds from 15 the SVRV Land project into the Moore Road Project…” Id. at ¶68. 16 “[O]n or around March 19, 2019, Kludt and Bragg met with Bob, Martha, and Mary and told them that they needed an additional $200,000 from them to keep 17 the Project going. … [Kludt and Bragg] said that Plaintiff could extend $200,000 in the form of short-term loans that would be promptly repaid with 12% interest.” 18 Id. at ¶87. 19 “That was a lie. … But because he trusted Kludt and Bragg, and was unaware of their dealings with Paramont, Bob extended a loan of $100,000 for the 20 Project from his personal account on March 19, 2019. The Arntsen Partnership also extended a loan of $100,000 on or about the same day.” Id. at ¶88. 21 “On or around May 10, 2019, SVRV repaid the $100,000 loan from the 22 Arntsen Partnership…But it returned to Bob only $3,641 of his $100,000 loan, and further failed to pay interest.” Id. at ¶94. 23 On or around March 23, 2020, Bragg emailed Plaintiffs stating that “he was 24 seeking to refinance the loan for the Moore Road Project[,] but [would need the financial support of all’ of the investors. Bragg warned that the investors ‘will need 25 to get a jump on this as the current loan [from Genesis] matures in June.’” Bragg further stated that “given the demands of Genesis, ‘we w[ill] need financial help 26 from all of you for an indefinite period.’” Id. at ¶110. 27 28 MEMO. IN SUPP. OF DEMURRER PAGE 4 HOU 4845786.2 1 Although the FAC details representations made by Kludt and Bragg, it does not mention 2 any misrepresentations made by the Moore Road LLCs or plead facts with particularity to support 3 such allegations.1 Thus, demurrer is warranted on Plaintiff’s first cause of action for fraud as to the 4 Moore Road LLCs. 5 B. Plaintiffs’ fail to state a claim as to their third and fifth cause of action for violation of 6 Cal. Bus. & Prof. Code § 17200, et seq against the Moore Road LLCs, Paramont 7 Capital, Paramont Woodside, Davis, Wolfe, and Justesen. 8 Plaintiffs have not alleged a valid cause of action under § 17200, et seq for two independent 9 reasons: (1) the only remedy they seek of damages is not permissible under the statute; and (2) they 10 have failed to alleged specific facts constituting a claim under the statute. 11 First, the remedy of damages sought by Plaintiffs are not available under the statute. It is 12 Section 17203 that entitles a private plaintiff to assert a cause of action under the unfair business 13 practices act (i.e. § 17200, et seq). (Cal. Bus. & Prof. Code § 17203.) But damages are not available 14 under Section 17203. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.) The statute 15 only permits injunction relief and restitution. (Id.) In addition, a claim of restitution under Section 16 17203 is limited to compelling a defendant to return money it obtained through an unfair business 17 practice to the person who had an ownership interest in it. (Korea Supply Co. v. Lockheed Martin 18 Corp. (2003) 29 Cal.4th 1134, 1149.) To meet the requirements, the defendant from whom 19 restitution is sought must have obtained something to which it was not entitled. (Feitelberg v. Credit 20 Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1012.) Thus, even if a plaintiff can trace 21 funds that it gave to someone that committed an unfair practice, it cannot recover them from the 22 offender as part of a legitimate transaction. 23 Here, the Plaintiffs have clearly alleged solely a claim for damages for both its Section 24 25 1 It should be noted that at paragraphs 25 and 26 of the FAC, Plaintiffs conclusorily allege that the Moore Road LLCs are the alter egos of Bragg and Kludt. However, the FAC fails to allege any facts to support that this is the case. 26 (See Stein v. Axis Ins. Co., 10 Cal. App. 5th 673, 679 (2017) (finding that conclusory allegations of alter ego status in a breach of contract action are insufficient.); see also Maganallez v. Hilltop Lending Corp., 505 F. Supp. 2d 594, 607 27 (2007) (noting that “conclusory allegations of alter ego status will not survive a motion to dismiss.”); Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 539 (2000) (concluding that “[a]lter ego is an extreme remedy, sparingly 28 used.”)). Thus, the Court should sustain a demurrer as to this allegation. MEMO. IN SUPP. OF DEMURRER PAGE 5 HOU 4845786.2 1 17200 claims, which is not legally permissible. (FAC. ¶¶ 185, 186, 187, 191, 207, 208.) Further, 2 the allegations are not sufficient to allege a claim for restitution because there are no facts indicating 3 that any of the demurring Defendants obtained funds from the Plaintiffs or obtained any funds to 4 which they were not entitled. 5 Second, the FAC does not properly allege the elements of an unfair business practice claim. 6 A plaintiff alleging unfair business practices under these statutes must state with reasonable 7 particularity the facts supporting the statutory elements of the violation. (Perdue v. Crocker 8 National Bank (1985) 38 Cal.3d 913, 929–930; Khoury v. Maly's of California, Inc. (1993) 14 9 Cal.App.4th 612, 619.) 10 Plaintiffs’ FAC does not identify a particular section of the unfair business practices 11 statutory scheme that Paramont Capital, Paramont Woodside, Davis, Wolfe, Justesen, or the Moore 12 Road LLCs supposedly violated. Also, the FAC does not describe with any reasonable particularity 13 the facts supporting the elements of any violation against the demurring Defendants. Instead, the 14 Plaintiffs allege misrepresentations, which were clearly made by Bragg, Kludt, and SVRV, and 15 cannot be attributed to the demurring Defendants, see supra, II.A. Again, Plaintiffs do not allege 16 any particular conduct committed by the demurring Defendants. Similarly, the FAC does not 17 describe any facts supporting statutory violations against Paramont Capital, Paramont Woodside, 18 Davis, Wolfe, Justesen, or the Moore Road LLCs. The Plaintiffs assert that each of the demurring 19 Defendants had a fiduciary duty to the Plaintiffs and that they allegedly concealed facts from the 20 Plaintiffs that should have been disclosed. (FAC ¶¶ 203-207.) And yet, Plaintiffs do not explain 21 how the supposed fiduciary duty or duty to disclose came to exist. Indeed, according to the FAC, 22 Plaintiffs did not sign the “Effective Operating Agreements” or the “Unapproved Operating 23 Agreements,” and simply gave Bragg, Kludt, and/or SVRV money based on their long-standing 24 relationship and trust. (Id. at ¶¶ 37, 40 59, 88, 99). Plaintiffs are attempting to make a connection 25 between themselves and the demurring Defendants, however, they were essentially strangers to 26 each other. The law does not support a fiduciary duty under such circumstances. 27 Thus, the demurrer should be sustained as to the third and fifth causes of action. Because 28 MEMO. IN SUPP. OF DEMURRER PAGE 6 HOU 4845786.2 1 the factual allegations cannot be re-plead to state a viable claim, Plaintiffs should not be afforded 2 an opportunity to amend. 3 C. Plaintiffs fail to properly plead a cause of action for fraudulent concealment. 4 It is well settled that every element of a cause of action for fraud must be alleged in the 5 proper manner and the facts constituting the fraud must be alleged with sufficient specificity to 6 allow the defendant to understand fully the nature of the charges being made. (Tarmann, 2 7 Cal.App.4th at 157; Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73; Roberts v. Ball, Hunt, 8 Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) The rationale for the strict requirement 9 of pleading is not merely notice to the defendant, but because the allegations of fraud involve a 10 serious attack on character, fairness to the defendant demands that the defendant should receive the 11 fullest possible details of the charge in order to prepare an adequate defense. (Stansfield, 220 12 Cal.App.3d at 73.) It is essential that the facts and circumstances which constitute the fraud be set 13 out clearly, concisely and with sufficient particularity to apprise the opposite party of what he is 14 called upon to answer. (Scafidi v. West Loan & Building Co. (1946) 72 Cal.App.2d 550, 558; 15 Goldrich v. Natural Y Surgical Specialties, Inc., 25 Cal.App.4th 772, 782 (finding that “[t]o 16 withstand a demurrer, the facts constituting every element of fraud most be alleged with 17 particularity, and the claim cannot be salvaged by references to the general policy favoring liberal 18 construction of pleadings.”).) 19 To state a cause of action for fraudulent concealment, a plaintiff must allege: (1) the 20 defendant concealed or suppressed a material fact; (2) the defendant was under a duty to disclose 21 the fact to the plaintiff; (3) the defendant intentionally concealed or suppressed the fact with the 22 intent to defraud the plaintiff; (4) the plaintiff must have been unaware of the fact and would not 23 have acted as he did if he had known of the concealed or suppressed fact; and (5) as a result of the 24 concealment or suppression of the fact, the plaintiff must have sustained damage. (See Marketing 25 West, Inc. v. Sanyo Fisher (U.S.A. Corp.) (1992) 6 Cal.App.4th 603, 612-613.) 26 1. Plaintiffs cannot establish the existence of any duty to disclose. 27 The mere failure to disclose, absent a duty to disclose, does not constitute fraud. (Crayton 28 MEMO. IN SUPP. OF DEMURRER PAGE 7 HOU 4845786.2 1 v. Super. Ct. (1985) 165 Cal.App.3d 443, 451.) There is no such duty without some relationship 2 between the parties; thus, between complete strangers there is no duty of disclosure. (LiMandri v. 3 Judkins (1997) 52 Cal.App.4th 326, 336-337.) Courts routinely grant demurrers 4 to fraudulent concealment claims where a plaintiff fails to allege facts giving rise to a duty to 5 disclose. (See, e.g., Goodman v. Kennedy, (1976) 18 Cal.3d 335, 347 (affirming demurrer and 6 noting that mere conclusory allegations are insufficient to demonstrate a confidential relationship 7 between the parties); see also, LiMandri, 52 Cal.App.4th at 336-337 (affirming demurrer absent 8 allegations of a transaction or relationship between plaintiff and defendant, such as that between a 9 buyer and seller or a doctor and patient); Kovich v. Paseo Del Mar Homeowners' Ass‘n (1996) 41 10 Cal.App.4th 863, 866-867.) 11 Here, Plaintiffs cannot allege the existence of a fiduciary relationship in good faith because, 12 in fact, no legal relationship ever existed between demurring Defendants and Plaintiffs that could 13 give rise to such a duty. (See, Barbara A. v. John G. (1983) 145 Cal.App.3d 369, 382-383 14 (describing fiduciary relationship as a recognized legal relationship such as guardian and ward, 15 trustee and beneficiary, principal and agent, or attorney and client).) Since Plaintiffs were not a 16 party to a single transaction with demurring Defendants, there was no duty to disclose owed by 17 demurring Defendants to Plaintiff, see infra, II.D. (See, Hahn v. Mirda (2007) 147 Cal.App.4th 18 740, 745 (dismissing fraudulent concealment claim because doctors only owed duty to patient - not 19 patient's spouse).) Indeed, Plaintiffs have not alleged that demurring Defendants had a duty to 20 disclose any information to them nor have they illustrated that an actual fiduciary relationship 21 existed and/or was formed. (FAC ¶¶223-231). Merely reciting that a “fiduciary relationship” 22 existed, does not create one. Because demurring Defendants owed no duty of disclosure to 23 Plaintiffs, the demurrer should be sustained. 24 2. Plaintiffs failed to properly plead a fraud cause of action against the demurring 25 entity defendants. 26 The requirement for specificity of pleadings in a fraud action against an entity, such as 27 several of the demurring Defendants here, requires that the Plaintiffs allege (1) the names of the 28 MEMO. IN SUPP. OF DEMURRER PAGE 8 HOU 4845786.2 1 persons who made the allegedly fraudulent representations; (2) their authority to speak; (3) to whom 2 they spoke; (4) what they said or wrote; and (5) and when it was said or written. (Tarmann, 2 3 Cal.App.4th at 157.) “Corporations are legal entities which do not have minds capable of 4 recklessness, wickedness, or intent to injure or deceive.” (Cruz v. HomeBase (2000) 83 Cal.App.4th 5 160, 167.) Only through their agents can form an entity form intent and commit tortious 6 acts. (Granite Constr. Co. v. Super. Ct. (1983) 149 Cal.App.3d 465, 472.) 7 Plaintiffs’ FAC does not contain the specificity required to plead a cause of action for fraud 8 against demurring Defendants, because it does not contain any specific allegations of fraud 9 committed by demurring Defendants. Rather, the FAC merely contains broad allegations levied at 10 all the defendants in this case. Blanket allegations of fraud, of whatever type, made globally against 11 different defendants, with different corporate officers, are not specific in any way shape or form to 12 demurring Defendants. Plaintiffs’ FAC does not mention which corporate agent made the 13 fraudulent representation, who they spoke to, what they said, or when it was said. (See generally 14 FAC.) Thus, the demurrer to Plaintiffs’ sixth and seventh causes of action should be sustained. 15 D. The Plaintiffs have failed to state a breach of fiduciary duty claim because they have 16 not alleged any facts creating a fiduciary duty. 17 The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary 18 relationship, (2) its breach, and (3) damage proximately caused by that breach. (Mendoza v. 19 Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.) Whether a fiduciary duty exists is a 20 question of law. (Marzec v. California Public Employees Retirement System (2015) 236 21 Cal.App.4th 889, 915.) 22 Plaintiffs assert that Paramont Capital, Paramont Woodside, Davis, Wolfe, Justesen, and 23 the Moore Road LLCs “held a fiduciary position of trust with respect to Plaintiffs” (FAC ¶ 233.) 24 However, the FAC does not actually allege any facts to support this conclusory assertion. There are 25 no allegations even identifying any interactions between Plaintiffs and Paramont Capital, Paramont 26 Woodside, Davis, Wolfe, Justesen, or the Moore Road LLC’s, much less interactions establishing 27 a fiduciary duty. The FAC asserts that the Plaintiffs loaned money to SVRV, but such a loan does 28 MEMO. IN SUPP. OF DEMURRER