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1 DOWNEY BRAND LLP 7010 JUL 10 PH 3- 25
WILLIAM R. WARNE (Bar No. 141280)
2 ANNIE S. AMARAL (Bar No. 238189)
AVALON J. FITZGERALD (Bar No. 288167) COUHfY.&r S^^KKH!-- ,10'
3 621 Capitol Mall, 18th Floor
Sacramento, CA 95814-4731
4 Telephone: 916.444.1000
Facsimile: 916.444.2100
5 bwame@downeybrand.com
aamaral@dovraeybrand.eom
6 afitzgerald@downeybrand. com
7 Attomeys for Plaintiff
CHARLES SOMERS, individually and as tmstee for the
8 CHARLES SOMERS LFVING TRUST
9 SUPERIOR COURT OF CALIFORNIA
10 COUNTY OF SACRAMENTO
11
12 CHARLES SOMERS, individually and as CASE NO. 34-2018-00229212
tmstee for the CHARLES SOMERS
13 LIVING TRUST, PLAINTIFF CHARLES SOMERS'S
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Q OPPOSITION TO DEFEIVDANT'S
Z 14 Plaintiff DEMURRER
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15 DATE: July 23, 2018
TIME: 9:00 a.m.
16 DR. JAMES LONGORIA, an individual, DEPT.: 54
and DOES 1-10,
o 17 Complaint Filed: March 16, 2018
Q Defendant. Trial Date: TBD
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BY FAX
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OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION 5
II. FACTUAL ALLEGATIONS CONTAINED IN THE COMPLAINT 5
4
A. Somers and Dr. Longoria's Early Relationship and Somers's Initial
5 Investment 5
6 B. Although Somers Provides the Company With Even More Money, LC
Therapeutics Fails to Live Up to Its Business Plan 6
7 C. When Somers Refiises to Provide More Money, Dr. Longoria Changes His
Tune 7
8
D. Dr, Longoria Files a Defective Demurrer in Response to Somers's
9 Complaint 7
III. LEGAL ANALYSIS 8
10
A. Legal Standard for a Demurrer 8
11 B. Somers Has Adequately Pleaded a Cause of Action for Fraud 9
12 1. Somers Has Adequately Alleged the Elements of Fraud 9
13 a. The promise to convert LC Therapeutics to an LLC 9
b. The promise to use equity as consideration for additional
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14 cash infusions 11
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c. The promise to make Somers a full "partner" in LC
CQ 15 Therapeutics 12
16 d. The promise to devote time and energy to the success of the
company 13
o 17 2. The Allegations Are Pleaded With the Requisite Specificity 13
Q C. Somers Eas Adequately Pleaded a Cause of Action for Negligent
18
Misrepresentation 14
19 D. Somers Has Adequately Pleaded a Cause of Action for Unjust Enrichment 15
20 E. Somers Has Adequately Pleaded a Cause of Action for Breach of Fiduciary
Duty 17
21 1. Dr. Longoria Owed Somers a Fiduciary Duty 17
22 2. Somers Adequately Alleged That Dr. Longoria Breached His
Fiduciary Duty 19
23 F. In the Event the Demurrer Is Sustained, Somers Requests Leave to Amend 19
24 YV. CONCLUSION 19
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I52407S.4
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
T A B L E OF AUTHORITIES
Page(s)
3 State Court Cases
Atascadero v. Merrill Lynch
4 (1998) 68 Cal.App.4th 445 8
California v. William S. Hart Union High Sch. Dist.
5 (2012) 53 Cal.4th 861 8, 9, 15, 16
Cansino v. Bank of America
6 (2014) 224 Cal.App.4th 1469 9, 14
7 Chapman v. Skype Inc.
(2013) 220 Cal.App.4th 217 15
8 Cleveland v. Johnson
(2012) 209 Cal.App.4th 1315 17, 19
9 Cohen v. S&S ConsL Co.
(1983) 151 Cal.App.3d 941 9
10 Comm. on Children's Television, Inc. v. Gen. Foods Corp.
(1983) 35 CaL3dl97 17, 19
11 CrossTalk Productions, Inc. v. Jacobson
(1998) 65 Cal.App.4th 631 8
12 Donabedian v. Mercury Ins. Co.
(2004) 116 Cal.App.4th 968 8
l-J 13 Dr. Longoria, Persson v. Smart Inventions, Inc.
(2005) 125 Cal.App.4th 1141 18,19
Q Engalla v. Permanente Med. Grp., Inc.
Z 14
(1997) 15 Cal.4th 951 passim
15 F.D.I.C. V. Dintino
PQ
(2008) 167 Cal.App.4th 333 16
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W 16 Fenton v. Groveland Comm. Srvs. Dist.
(1982) 135 Cal.App.3d 797 19
O 17 Ghirardo v. Antonioli
Q (1996) 14Cal.4th39 16
18 Gray v. Don Miller & Assocs., Inc.
(1984) 35 Cal.3d498 11, 15
19 Hayward v. Henderson
(1979) 88 Cal.App.3d 64 8, 16
20 Jones V. H.F. Ahmanson & Co.
(1969) 1 Cal.3d93 17, 19
21 Newton-Enloe v. Horton
(2011) 193 Cal.App.4tii 1480 5
22 Oakland Raiders v. Nat 'I Football League
(2005) 131 CaLApp.4th 621 18
23 Richard B. Le Vine, Inc. v. Higashi
(2005) 131 Cal.App.4th 566 18
24 Richelle L. v. Roman Catholic Archbishop
(2003) 106 Cal.App.4th 257 18
25 Salimi v. State Comp. Ins. Fund
(1997) 54 Cal.App.4th 216 8
26 Stevens v. Superior Court
(1999) 75 Cal.App.4th 594 9
27 Tarmann v. State Farm Mut. Auto. Ins. Co.
(1991)2 Cal.App.4th 153 14
28
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAIN!^
1 TABLE OF AUTHORITIES
(continued)
2 Page
3 Tenet Healthsystem Desert, Inc. v. Blue Cross of Cal.
(2016) 245 Cal.App.4th 821 14
4 Vai V. Bank of Am.
(1961)56Cal.2d329 18
5 State Statutory Authorities
6 Cal. Rules of Court 3.1300 8
Code Civ. Proc. § 435 8
7 Code Civ. Proc. § 452 9
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OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 I. INTRODUCTION
2 Defendant Dr. Longoria and Plaintiff Charles Somers were business associates and fiiends
3 for approximately eight years before they became business partners in LC Therapeutics ("the
4 company"), a company founded by Dr. Longoria in 2013 and heavily fimded by Somers over the
5 course of several years. Among other things. Dr. Longoria promised Somers that, if Somers
6 became a shareholder. Dr. Longoria would convert the company from an S Corporation to an
7 LLC. Dr. Longoria also promised he would use equity as consideration for additional cash
8 infusions and that Somers could purchase as much equity in the company as he wanted.
9 Moreover, Dr. Longoria promised Somers that if he agreed to loan LC Therapeutics additional
10 capital, Somers would have a full seat at the table and be completely co-equal in terms of all
11 decision making and running all aspects ofthe company. Finally, Dr. Longoria promised that he
12 would devote his time and energy to making the company successful.
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13 Unfortunately, Dr. Longoria representations were not tme. Instead of giving Somers the
14 benefit of the bargain he promised, Longoria made himself President, CEO, CFO, and Secretary.
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m 15 He failed to memorialize the terms of Somers's loans and investments in the company, and
w 16 quietly failed to memorialize Somers's status as a board member. Today, despite Somers's
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o 17 financial contributions of millions of dollars, LC Therapeutics is collapsing.
18 Due to Dr. Longoria's misrepresentations and broken promises, Somers has filed suit
19 against Dr. Longoria, alleging causes of action forfraud,negligent misrepresentation, unjust
20 enrichment, and breach offiduciaryduty. None of Dr. Longoria's legal challenges to the
21 complaint have merit. Somers therefore requests that the Court overrule the demurrer in its
22 entirety.
23 n. FACTUAL ALLEGATIONS CONTAINED IN THE COMPLAINT
24 Somers and Dr. Longoria's Early Relationship and Somers's Initial Investment
25 Dr. Longoria and Somers have known each other since 2005. (Compl. ^ 7.) The two
26
' Dr. Longoria also requests judicial notice of a petition for dissolution filed in Delaware's Court of Chancery, but he
27 fails to explain how this document is relevant to this Court's ruling on liis demurrer. The Court should therefore
deny his request. {Cf. Newton-Enloe v. Horton{20\l) 193 Cal. App.4th 1480, 1493,fii. 3 [declining to take judicial
28 notice of materials "because plaintifTs have not satisfactorily explained the relevance ofthe materials."].)
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 quickly became friends and then business associates in a separate business venture. {Id. ^ 7, 8.)
2 Dr. Longoria eventually informed Somers that he had filed patents for a device called the L Chord
3 and for an RF ablation device, which he claimed would revolutionize several common heart
4 surgeries. {Id. ^ 9.) These patents were owned by Intrepid Medical ("Intrepid"), a company Dr.
5 Longoria had co-founded with his "partner" Roy Chin in April 2013. (Ibid.) The two men were
6 the company's sole shareholders and board members. (Ibid.)
7 In July or August of 2013, Mr. Chin and Dr. Longoria pitched Somers on investing $2
8 million in the company. {Id. 111.) They discussed Intfepid's business plan, and claimed Intrepid
9 would be profitable by 2015. (Ibid.) Dr. Longoria promised that he would fully commit his
10 expertise, time, and energy to making Intrepid a success. (Id. H 14.) Somers initially preferred to
11 loan the company money on conventional terms, (id. f 15), but Dr. Longoria pushed Somers to
12 become a shareholder. (Ibid.) Dr. Longoria not only assured Somers that Intrepid's medical
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13 devices would be approved by the FDA and proceed to market quickly, but also promised that if
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z 14 and when the company needed additional funding, Somers could purchase additional equity to
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CQ 15 whatever extent he wanted. (Ibid.) Because Somers was concemed that the company was an S
Z 16 Corporation, Dr. Longoria promised to convert Intrepid to an LLC. {Ibid.) Ultimately, in the fall
o 17 of 2013, and in reliance on these representations, Somers agreed to provide start-up capital of $2
18 million, and graciously agreed to became a 20 percent shareholder. (Id. ^ 17.) Shortly thereafter,
19 the company's name was changed to LC Therapeutics. {Ibid.)
20 B. Although Somers Provides the Company With Even More Monev. L C Therapeutics
Fails to Live Up to Its Business Plan.
21
22 As time went on, LC Therapeutics failed to execute on its business plan and fell further
23 and further behind on key milestones. (Compl. ^ 18.) Somers grew increasingly concemed, and
24 when Mr. Chin unexpectedly resigned from the company in November 2014, Somers took the
25 opportunity to become a 50 percent shareholder, infusing an additional $1,355 million into the
26 company with his stock purchase. {Id. ^ 22, 23, 24.) Dr. Longoria promised Somers that if he
27 invested additional money, Somers would replace Mr. Chin on the board and that they would be
28 equal "partners" with equal conb-ol over all company decisions. (Id. ^ 23.) Dr. Longoria
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 reiterated that he would devote the time and energy necessary to develop and market the
2 company's patents. {Id. ^ 24.)
3 Despite this cash infusion, the company's situation did not improve. (Compl. ^ 26.)
4 Dr. Longoria approached Somers for even more money, but with Somers already owning
5 50 percent of the company's shares. Dr. Longoria wanted to prevent Somersfromobtaining
6 majority control. Thus, he insisted that Somers instead provide additional funding through loans,
7 ultimately amounting to $3.7 million. (Id. H 27.) Dr. Longoria continued to represent to Somers
8 (as well as to others) that Somers was his "partner" and that he shared equal control of the
9 company (M 29, 31.) '
10 C. When Somers Refuses to Provide More Monev, Dr. Longoria Changes His Tune.
11 Despite Somers's ongoing infusions of cash and his other efforts to make the company
12 successfijl, LC Therapeutics did not make substantial progress. (Compl. ^ 33, 42.) Somers
13 made clear that he would not continue to fund LC Therapeutics without significant managerial
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Z 14 changes. (Id. Tf 33.) Somers reminded Dr. Longoria of his promises to make the company an
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CQ 15 LLC and to raise capital through selling additional equity. (Id. ^ni 33, 36.) But once Somers
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pu 16 made clear that his willingness to fimd LC Therapeutics was not endless. Dr. Longoria began to
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o 17 exclude Somers from business decisions and unilaterally appointed board members without
18 consulting Somers. (Id. 37, 38, 39.) Moreover, in late 2017, Somers leamed that, while
19 Dr. Longoria had repeatedly assured Somers that he would be a co-equal "partner," he had
20 secretly passed a resolution making himself President, CEO, CFO, and Secretary, {id. ^ 39), and
21 that he had failed to formally add Somers to the board. (Id. ^ 40.) Thus, when Somers insisted
22 that Dr. Longoria take certain actions torightthe company's course. Dr. Longoria informed
23 Somers that Somers had no control over the company or its business decisions and had norightto
24 obtain information about Dr. Longoria's unilateral efforts on the company's behalf (Id. ^ 37.)
25 Having infused over $7 million into the company based on promises that tumed out to be false,
26 Somers was left with little choice other than to file this action.
27 D. Dr. Longoria Files a Defective Demurrer in Response to Somers's Complaint.
28 Somers filed his complaint on March 16, 2018, and based on a prior Court order.
1524075.4
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 Dr. Longoria's responsive pleading was due on Jime 21, 2018. (Declaration of Annie S. Amaral
2 ("Amaral Decl.") 2, 3.) Dr. Longoria's demurrer isfile-stampedJune 21, but it is rife with
3 procedural problems. The demurrer was not placed in the mail for service until Jime 25, 2018,
4 which is only 19 days before the hearing on this motion. (Id. T| 4.) Moreover, while the notice of
5 demurrer is dated June 21, the portion of the "notice" setting forth the basis for the demurrer is
6 not only inaccurate, it is dated June 27, and was received by Somers's counsel on July 6. {Id.
7 15.) Accordingly, the demurrer should be stricken or overmled in its entirety, as it was not filed
8 in conformity with the laws of Califomia nor was it served in accordance with this Court's order.
9 (Code Civ. Proc, §§ 435, 1005, subd. (b); Cal. Rules of Court, mle 3.1300.) Additional
10 procedural infirmities also exist. For instance, while the declaration of Dr. Longoria's counsel
11 states that the parties met and conferred on April 18, 2018 (Declaration of Jan Dudensing,
12 June 21, 2018, ^ 3), during that call Dr. Longoria's counsel merely mentioned that she believed
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13 there were issues with thefraudand breach offiduciaryduty causes of action, and requested
14 fiarther time to analyze whether a demurrer was warranted. (Amaral Decl. ^ 6.) There were no
CQ 15 further calls on the subject of any kind.
16 m. LEGAL ANALYSIS
O 17 A. Legal Standard for a Demurrer
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18 A demurrer tests the legal sufficiency of the pleading that it challenges. {Salimi v. State
19 Comp. Ins. Fund (1997) 54 Cal.App.4th 216, 219.) Because a demurrer raises only questions of
20 law, it cannot allege facts, deny facts, or allude to extrinsic evidence not subject to judicial notice.
21 (Hayward v. Henderson (1979) 88 Cal.App.3d 64, 71.) Nor can a demurrer be used to determine
22 the tmth of disputed facts or to resolve competing inferences. (CrossTalk Productions, Inc. v.
23 Jacobson (1998) 65 Cal.App.4tii 631, 635; Atascadero v. Merrill Lynch (1998) 68 Cal.App.4th
24 445, 459.) Instead, and for purposes of evaluating the sufficiency of the pleading on demurrer,
25 "all material allegations of the complaint are accepted as tme." (Donabedian v. Mercury Ins. Co.
26 (2004) 116 Cal.App.4th 968, 976.) "To survive a demurrer, the complaint need only allege facts
27 sufficient to state a cause of action; each evidentiary fact that might eventually form part ofthe
28 plaintiffs proof need not be alleged." (California v. William S. Hart Union High Sch. Dist
1524075.4 8
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 (2012) 53 Cal.4th 861, 872.) Indeed, the complaint is to be constmed "liberally.. . with a view
2 to substantial justice between the parties." (Code Civ. Proc, § 452; see Stevens v. Superior Court
3 (1999) 75 Cal.App.4th 594, 601.) To this end, courts "give the complaint a reasonable
4 interpretation, reading it as a whole and its parts in their context." (Hart Union High Sch. Dist,
5 53 Cal.4th at 866 [quotation omitted].)
6 B. Somers Has Adequately Pleaded a Cause of Action for Fraud.
7 1. Somers Has Adequately Alleged the Elements of Fraud.
8 a. The promise to convert LC Therapeutics to an LLC
9 Dr. Longoria contends his promise to convert LC Therapeutics from an S Corporation to
10 an LLC is not an actionable false statement because it is a "vague statement regarding a future
11 possibility." (Mot. at 9.) Not so. While statements about the future that are opinions or
12 predictions are not actionable, {Cohen v. S&S ConsL Co. (1983) 151 Cal.App.3d 941, 201), a
13 statement that expresses the speaker's present intent to take an action in the future is actionable
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14 because the statement describes a fact, (Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th
CQ 15 951, 973). "A promise to do something necessarily implies the intention to perform; hence,
16 where a promise is made without such intention, there is an implied misrepresentation of fact that
O 17 may be actionable fraud." (Ibid.)
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18 For example, in Cansino v. Bank of America, the case Dr. Longoria appears to rely upon
19 in support of this argument, the coiut found that representations by the defendant bank's "lending
20 personnel" that the "plaintiffs' property was appreciating and that [the] plaintiffs could obtain
21 several yeai s of appreciation in their property so that they could sell or refinance before having to
22 make higher monthly payments . . ." was a "forecast of fiiture events" and not an actionable
23 misrepresentation. ((2014) 224 Cal.App.4th at 1469.) By contrast here, Somers alleges that when
24 he "raised concerns about the company's status as an 'S' corporation and the resulting tax
25 implications to him" i f he were to become a shareholder, "Dr. Longoria promised that he would
26 convert [the company] to a limited liability company" in an effort to induce Somers to purchase
27 shares in the company rather than loan the company money. (Compl. ^ 15.) This promise was a
28 representation of Dr. Longoria's present intent to take an action in the future. It was made to
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 Somers by Dr. Longoria in between July 2013, when Mr. Chin and Dr. Longoria initially pitched
2 Somers on the company, and September 3, 2013, when Somers provided the company with the
3 first installment of start-up capital in the amount of $1 million. (Compl. tTfl3,17.) Although
4 Dr. Longoria objects that the complaint does not allege when the promised conversion would take
5 place, there is no requirement that this fact be alleged. Somers subsequently reiterated this
6 demand to Dr. Longoria in 2017, and it was only at this point that Dr. Longoria made clear that he
7 would not honor his promise. (Id. ^ 36.)
8 Dr. Longoria next points to the allegation that in the summer of 2017, "Somers also
9 reminded Dr. Longoria of his earlier promise to convert the company from an 'S' corporation to a
10 limited liability company, and Dr. Longoria refused to do so," as a supposed flaw in Somers's
11 cause of action for fraud. He contends that because Somers owned half of the company in 2017,
12 at the time Somers revisited this issue, Somers could have forced the company to be converted to
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13 an LLC based on his ownership and supposed seat on the board. (Mot. at 22-24.) But this
14 argument goes to whether the company could have been converted to an S Corporation in 2017,
15 not to whether Dr. Longoriafraudulentiyrepresented to Somers in 2013 that he would make this
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z 16 conversion so that Somers would invest in the company. (Mot. at 9; Compl. ^ 36.) Nor does
O 17 Somers's supposed ability to compel the company to take any action in 2017 change the damages
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18 he suffered as the result of Dr. Longoria'sfraudprior to that time. Accordingly, this argument
19 has no bearing on whether Somers has successfully stated a cause of action forfraudbased on
20 Dr. Longoria's promise that this conversion would be made.
21 Dr. Longoria then appears to claim that, because Somers eventually became a co-equal
22 owner of the company, with "all information available to him and the ability [and] authority" to
23 dictate the terms of his investment, he could not have plausibly relied upon Dr. Longoria's
24 representations at the outset of their business relationship. But Dr. Longoria's attack on Somers's
25 reliance is conclusory and misimderstands the facts. (Mot. at 9.) The complaint establishes that
26 Somers did not own any of the company when Dr. Longoria promised Somers that he would
27 convert the company from an S Corporation to an LLC, that Dr. Longoria made this promise to
28 induce Somers to become a shareholder, and that Somers agreed to purchase shares based on this
1524075.4 .-' 10
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 representation. This is more than sufficient to plead reliance, as "[ajctual reliance occurs when a
2 misrepresentation is 'an immediate cause of [a plaintiffs] conduct, which alters his legal
3 relations,' and when, absent such representation, 'he would not, in all reasonable probability,
4 have entered into the contract or other transaction.'" (Engalla, 15 Cal.4th at 976-977 [quotations
5 and citations omitted].) Critically, "[i]t is not... necessary that [a plaintiffs] reliance upon the
6 tmth of thefraudulentmisrepresentation be the sole or even the predominant or decisive factor in
7 influencing his conduct.... It is enough that the representation has played a substantial part, and
8 so has been a substantial factor, in influencing his decision." (Ibid, [citation omitted].)
9 Moreover, "[w]hether reliance is justified is a question of fact for the determination ofthe trial
10 court." {Gray v. Don Miller & Assocs.. Inc. (1984) 35 Cal.3d 498, 503.) It is therefore generally
11 not suitable for determination on a demurrer, which tests only the legal sufficiency of the
12 pleadings.^ Somers's allegations of reliance are thus more than sufficient to survive
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13 Dr. Longoria's demurrer.
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14 b. The promise to use equity as consideration for additional cash infusions
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CQ 15 Dr. Longoria next argues that his representation to Somers in 2013 that the company
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16 would use equity as consideration for additional cash infusions was not a misrepresentation
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o 17 because Somers himself infused additional cash into the company in exchange for equity. (Mot.
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18 at 10.) This argument misses the point entirely. Somers alleges that, in the fall of 2013, to entice
19 Somers to invest as a shareholder rather than a lender. Dr. Longoriafraudulentlypromised him
20 that "if and when the company needed additional fimding,.. . [the company] would allow him to
21 take advantage o f this stmcture, such that Somers "could purchase additional equity in the
22 company, to whatever extent he was interested." (Compl. ^ 15.) Yet Dr. Longoria later refused
23 to permit Somers to contribute additional funds in exchange for more shares and rejected
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25 ^ To the extent the Court deems it appropriate to address the reasonableness of Somers's reliance as a matter of law, it
is evident that his reliance was reasonable. Somers and Dr. Longoria had known each other for eight years prior to
26 the time that Dr. Longoria initially pitched Somers ou investing in the company, and werefiiends.{Id. ^ 7-8.)
They had been involved in a prior business venture together. {Id. ^ 8.) Indeed, they were close enoughfiiendsthat
27 their families spent Thanksgiving together in Hawaii at Somers's home. {Id. ^ 23.) Taking these allegations as true
and drawing all inferences in Somers's favor, it is clear that Somers has adequately alleged facts demonstrating that
28 his reliance upon Dr. Longoria's representations was completely reasonable.
1524075.4 11
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 Somers's recommendation that the company sell additional shares to private equity to raise funds,
2 and now the company "is on the brink of collapse." (Id. ^ 33, 42.) The fact that Somers
3 purchased additional shares in the company to become a co-equal shareholder in 2015 does
4 nothing to change the fact that Dr. Longoria later refused to make good on his promise that
5 Somers could "purchase additional equity . . . to whatever extent" he wanted, (Id. ^ 15), and
6 prevented other potential investors from infusing much-needed cash.
^ c. The promise to make Somers a fiill "partner" in LC Therapeutics
8 Dr. Longoria ftirther contends that his repeated promises to Somers that "Somers would
9 share control of the company and that he would become Dr. Longoria's full 'partner' in all
10 business decisions in exchange for his willingness to invest in the company and loan the company
11 millions of dollars," (Compl. f 44(c)), does not support a cause of action forfraudbecause
12 Somers ovraed 50 percent of the company, and was held out as an equal and treated as an equal
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13 until his relationship with Dr. Longoria deteriorated in the summer of 2017. (Mot. at 10.) But
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Z 14 that is precisely the point. Dr. Longoria initially made it appear to Somers that he had equal
CQ 15 control as well as an equal say in the company. He did so in order to entice Somers to continue to
16 make millions in loans to the company. When Somers made clear that no more money was
O 17 coming, absent Dr. Longoria making good on his prior promises and. giving Somers additional
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18 control, Dr. Longoria began to exclude Somersfrombusiness decisions, unilaterally appointed a
19 board member, and revealed to Somers that he had secretiy appointed himself to multiple officer
20 positions and Somers was not a tme board member, such that "he could do whatever he chose to
21 do and Somers, as an alleged mere shareholder, could do nothing to stop him." (Compl. ^ 37-
22 39, 42.) Had Dr. Longoria's representations that Somers would be a full "partner" in all business
23 decisions not beenfraudulent.Dr. Longoria would not have excluded Somers, and would not
24 have secretly set up the business to create the argument that he had the ability to do so.
25 Dr. Longoria representations were absolutely material, and Somers clearly alleges that these
26 representations were "an immediate cause of [Somers's] conduct" in investing in LC
27 Therapeutics and loaning the company money, "which alter[ed] his legal relations," and, "absent
28 [this] representation" by Dr. Longoria, Somers "would hot, in all reasonable probability, have
1524075.4 12
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 entered into the . . .fransaction."{Engalla, 15 Cal.4th at 976-977.)
2 c?. The promise to devote time and energy to the success ofthe company
3 Finally, Dr. Longoria takes issue with the cause of action for fraud based on his
4 misrepresentation to Somers that he would "devote time and energy to the success ofthe
5 company, notwithstanding his other commitments." (Compl. Tf 44(b); Mot. at 10.) While
6 Dr. Longoria protests that the complaint does not allege when this representation was made, or
7 the "context" in which it was made, the complaint clearly alleges that Dr. Longoria made this
8 statement between Thanksgiving of 2014, when Somers and Dr. Longoria discussed the terms of
9 Somers's increased equity stake in the company, and January 30, 2015, when Somers purchased
10 $ 1,355,000.00 in LC Therapeutics' stock. {Id. 23-25.) He reiterated this promise at the end of
11 2015, when "he again promised that he would do all that was necessary to make the company
12 successful. . . . " (Id. ^ 26.) And, contrary to Dr. Longoria's argument, the complaint most
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13 certainly does allege that this promise by Dr. Longoria was a misrepresentation. Somers alleges
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Z 14 that "Dr. Longoria was distracted by his practice and failing to tend to his duties as CEO and
CQ 15 Secretary." {Ibid.) Rather than take responsibility for LC Therapeutics' problems, such as
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16 failures of the L Chord, Dr. Longoria "resorted to blaming the product engineers." (Id. T| 28.)
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17 Because of Dr. Longoria's busy schedule, he had difficulty going to "the Bay Area in order to
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18 consult with the manufacturing entities LC [Therapeutics] had contracted with . . . to manufacture
19 the L Chord." (Id. f 31.) Thus, Somers has clearly and specifically alleged numerous examples
20 of Dr. Longoria's failure to devote his time and energy to the company. Of course, this
21 misrepresentation harmed Somers because he relied upon this promise when he agreed to invest
22 more money into the company, (Engalla, 15 Cal.4th at 976-977), and Dr. Longoria's lack of
23 commitment to the company caused the company to stmggle financially, which in tum caused
24 Dr. Longoria to seek even more money from Somers.
25 2. The Allegations Are Pleaded With the Requisite Specificity.
26 Dr. Longoria also contends that Somers's cause of action forfraudfails because Somers
27 purportedly does not allege specific facts regarding the "how, when, where, to whom, and by
28 what means" the alleged misrepresentations were made. Critically, however, the allegations need
1524075,4 13
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 only be sufficient to allow the defendant "to understand fully the nature of the charge made."
2 (See Tarmann v. State Farm MuL Auto. Ins. Co. (1991) 2 Cal.App.4tii 153, 157; see also Tenet
3 Healthsystem Desert, Inc. v. Blue Cross of Cal (2016) 245 Cal.App.4th 821, 838.) "Less
4 specificity in pleadingfraudis required when it appearsfromthe nature of the allegations that the
5 defendant must necessarily possess full information conceming the facts of the controversy . . . . "
6 (Cansino, 224 Cal.App.4th at 1469 [quotation omitted].) And although Dr. Longoria takes issue
7 with the fact that it is unknown in what "capacity" he made certain promises to Somers, this
8 requirement applies only when the cause of action forfraudis brought "against a corporation,"
9 not when the cause of action is brought against an individual and merely relates to a corporation.
10 (See Tarmann, 2 Cal.App.4th at 157; Cansino, 224 Cal.App.4tii at 1469.)
11 Here, and as set forth in more detail above, the allegations supporting Somers's fraud
12 cause of action are pleaded with more than adequate specificity. While specific dates and times
cu
-]
13 are not pleaded, thetimeframesin which these promises were made are readily apparentfromthe
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Z 14 face of the complaint. The cfrcumstances and context of Dr. Longoria's various representations
CQ 15 are similarly clear. It is also obviousfromthe allegations that these promises were made directly
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16 by Dr. Longoria to Somers. In short, the allegations regarding Dr. Longoria's actions and
z
o 17 misrepresentations are not only extremely specific, they are more than adequate for Dr. Longoria
Q
18 "to understand fijlly the nature of the charge made." {Tarmann, 2 Cal.App.4th at 157.)
19 c. Somers Has Adequately Pleaded a Cause of Action for Negligent Misrepresentation.
20 Dr. Longoria claims that Somers's cause of action for negligent misrepresentation fails for
21 the same reasons that Somers's cause of action forfraudfails. (Mot. at 12.) But, as explained
22 above, Somers's complaint more than sufficiently states a cause of action forfraud,and his
23 demurrer to the cause of action for negligent misrepresentation on this basis likewise lacks merit.
24 Dr. Longoria further contends that Somers fails to allege that the statements at issue "were
25 made with an improper intent or negligently." (Mot. at 12.) As an altemative to hisfraudclaims,
26 Somers alleges that Dr. Longoria negligently made four specific misrepresentations, and that he
27 made "these representations without any reasonable basis for then tmthfulness . . .." (Compl.
28 H 51.) While Somers primarily alleges that Dr. Longoria's statements were intentional
1524075.4 14
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 misrepresentations, "[t]he essential elements of a count for negligent misrepresentation are the
2 same [as a count forfraud]except that it does not require knowledge of falsity but instead
3 requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to
4 be tine," {Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 231.) It is well settled that a
5 litigant may plead the same cause of action according to different legal theories or different
6 versions of ultimate facts. Indeed, "when for any reason the pleader thinks it desirable so to
7 do,... his pleading may set forth the same cause of action in varied and inconsistent counts with
8 strict legal propriety." (4 Witkin, Cal. Proc. 5tii ed.. Pleading, § 402 (2008).) That is precisely
9 what Somers has done here, as the exact nature of Dr. Longoria's intent at the time he made these
10 representations to Somers is presently undiscovered. Thus, Somers's complaint brings causes of
11 action for bothfraudand negligent misrepresentation. His allegations for negligent
12 misrepresentation are sufficient, as he is not required to plead this cause of action with
p^
13 particularity, nor is he required to allege "each evidentiary fact that might eventually form part of
h-l
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Z 14 [his] proof. . . ." {Hart Union High Sch. DisL, 53 Cal.4tii at 872.) Somers's allegations
CQ 15 regarding Dr. Longoria's intent are thus sufficient to survive a demurrer.
>-
U 16 Dr. Longoria finally challenges the adequacy and credibility of Somers's allegations that
o 17 he reasonably relied upon Dr. Longoria's misrepresentations. But, as set forth above, a plaintiff
Q
18 "actually" relies on a misrepresentation when it plays a substantial role in influencing the
19 plaintiffs actions—i.e., but for the representation, the plaintiff would likely not have behaved in
20 the same way. (Engalla, 15 Cal.4th at 976-977.) The misrepresentation need not be the only or
21 even the predominant factor motivating the plaintiffs actions. It must simply be a substantial
22 influence. (Ibid.) This standard is readily satisfied here. And, again, because the question of
23 reliance one of fact, {Gray, 35 Cal.3d at 503), determining the reasonableness of Somers's
24 reliance is not appropriate on a demurrer.
25 D. Somers Has Adequately Pleaded a Cause of Action for Unjust Enrichment.
26 Next, although Dr. Longoria argues that Somers's cause of action for unjust enrichment is
27 "unintelligible," it is, in reality, quite straightforward: Dr. Longoria was personally and unjustly
28 enriched by the amount of the tax benefits he received at Somers's personal expense. (Mot.
1524075.4 15
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 at 12:22.) More specifically, Somers invested and loaned a total of over $7 million to LC
2 Therapeutics, based in part on Dr. Longoria's promise to convert the company into an LLC from
3 an S Corporation. (Compl. 154.) Dr. Longoria never made this change. {Ibid.) Dr. Longoria
4 received tax savings as the result of LC Therapeutics remaining an S Corporation. {Ibid.) These
5 tax benefits were received by Dr. Longoria at the expense of Somers's investment in the company
6 and at the expense of a tax benefit that Somers would have received had die company been
7 converted to an LLC. (Compl. 54.) These allegations are more than adequate to satisfy the
8 requirements for pleading a cause of action for unjust enrichment, as "[a] person is enriched if he
9 receives a benefit at another's expense," and "[t]he term benefit denotes any form of advantage."
10 {Ghirardo v. Antonioli (1996) 14 Cal.4fli 39, 51 [citation omitted].)
11 Sfrangely, Dr. Longoria also challenges Somers's unjust enrichment cause of action on the
12 basis that it "sounds in confract," but complains that "no confract between Somers and Longoria
PH
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13 has been alleged . . . . " (Mot. at 13:1.) But that is precisely the fimction of a claim for unjust
a 14 enrichment: it exists where there is not a contract between the parties. "[A] cause of action for
z
15 unjust enrichment is not based on, and does not otherwise arise out of, a written confract. Rather,
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m 16 unjust enrichment is a common law obligation implied by law based on the equities of a particular
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o 17 case and not on any contractual obhgation." {F.D.I.C. v. Dintino (2008) 167 Cal.App.4th 333,
o
18 346 [citation omitted].) "[T]he equitable remedy of restitution when unjust enrichment has
19 occurred is an obligation (not a tme contract [citation]) created by the law without regard to the
20 intention ofthe parties, and is designed to restore the aggrieved party to his or her former position
21 by retum of the thing or its equivalent in money." (Ibid, [omission in original] [quotation
22 omitted].) Thus, Dr. Longoria's challenge on this basis completely lacks merit.
23 Finally, Dr. Longoria launches into a recital of the actions Somers "could have" taken to
24 prevent Dr. Longoriafromreceiving this benefit, or to ensure that the company was converted to
25 an S Corporation. (Mot. at 13:10-16.) These arguments have no bearing on whether "the
26 complaint... al]ege[s] facts sufficient to state a cause of action . .. ." {Hart Union High Sch.
27 DisL, 53 Cal.4th at 872.) Dr. Longoria's efforts to allege and deny facts are misplaced,
28 (Hayward, 88 Cal.App.3d at 71), as Somers's "ability to prove [his] allegations, or the possible
1524075.4 \ 6
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 difficulties in making such proof," has no bearing on the legal sufficiency of his complaint.
2 {Comm. on Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 213-214,
3 superseded by statute on other grounds.)
4 E. Somers Has Adequately Pleaded a Cause of Action for Breach of Fiduciary Dut>'.
5 1. Dr. Longoria Owed Somers a Fiduciary Duty.
6 Dr. Longoria first argues that he owed no fiduciary duty to Somers. "A fiduciary
7 relationship is 'any relation existing between parties to a fransaction wherein one of the parties is
8 in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation
9 ordinarily arises where a confidence is reposed by one person in the integrity of another
10 {Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1338 [quotation omitted].) A fiduciary
11 relationship may be imposed as a matter of law. (Ibid.) As relevant here, relationships in which a
12 fiduciary duty is imposed as a matter of law include the relationship between partners, {Enea v.
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13 Superior Court (3-D) (2005) 132 Cal.App.4th 1559, 1564), tiie relationship between majority and
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Z 14 minority shareholders, (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108), the relationship
DQ 15 between a corporation's directors and officers and its shareholders, (id. at 110.), and the
W
Z 16 relationship between a corporation's promoter and one who decides to invest in the corporation
o 17 based on the promoter's representations, {Cleveland, 209 Cal.App.4th at 1339). (See also
Q
18 Marsh's Cal. Corp. L. § 11.01 [officers, directors, promoters, and majority shareholders owe
19 duties to shareholders].) While Somers specifically alleged that Dr. Longoria owed him a
20 fiduciary duty based on his status as CEO of the company and Somers's status as a shareholder,
21 (Compl. % 57), the facts in the complaint also make clear that Dr. Longoria owed Somers a
22 fiduciary duty based on his status as a promoter of the corporation, (id. THJ 9-17), and his position
23 as a member of the board of directors, {id. 9). Well-settled law establishes that as a director,
24 officer, and promoter. Dr. Longoria owed Somers a duty based on Somers's status as a
25 shareholder. {Cleveland, 209 Cal.App.4tii at 1338; Jones, 1 Cal.3d at 108; Marsh's Cal. Corp. L.
26 § 11.01.) Dr. Longoria also owed Somers a duty during the time that Somers was a minority
27 shareholder and Dr. Longoria and Mr. Chin confroUed the company. {Jones, 1 Cal.3d at 108.)
28 In addition to the fiduciary relationships imposed by law, "[a] fiduciary relationship is
1524075.4 17
OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT
1 created where a person r
Preview
1 ::y- Vv" ED- EHOORSEO 1 DOWNEY BRAND LLP 7010 JUL 10 PH 3- 25 WILLIAM R. WARNE (Bar No. 141280) 2 ANNIE S. AMARAL (Bar No. 238189) AVALON J. FITZGERALD (Bar No. 288167) COUHfY.&r S^^KKH!-- ,10' 3 621 Capitol Mall, 18th Floor Sacramento, CA 95814-4731 4 Telephone: 916.444.1000 Facsimile: 916.444.2100 5 bwame@downeybrand.com aamaral@dovraeybrand.eom 6 afitzgerald@downeybrand. com 7 Attomeys for Plaintiff CHARLES SOMERS, individually and as tmstee for the 8 CHARLES SOMERS LFVING TRUST 9 SUPERIOR COURT OF CALIFORNIA 10 COUNTY OF SACRAMENTO 11 12 CHARLES SOMERS, individually and as CASE NO. 34-2018-00229212 tmstee for the CHARLES SOMERS 13 LIVING TRUST, PLAINTIFF CHARLES SOMERS'S H-l Q OPPOSITION TO DEFEIVDANT'S Z 14 Plaintiff DEMURRER < 15 DATE: July 23, 2018 TIME: 9:00 a.m. 16 DR. JAMES LONGORIA, an individual, DEPT.: 54 and DOES 1-10, o 17 Complaint Filed: March 16, 2018 Q Defendant. Trial Date: TBD 18 19 20 BY FAX 21 22 23 24 25 26 27 28 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION 5 II. FACTUAL ALLEGATIONS CONTAINED IN THE COMPLAINT 5 4 A. Somers and Dr. Longoria's Early Relationship and Somers's Initial 5 Investment 5 6 B. Although Somers Provides the Company With Even More Money, LC Therapeutics Fails to Live Up to Its Business Plan 6 7 C. When Somers Refiises to Provide More Money, Dr. Longoria Changes His Tune 7 8 D. Dr, Longoria Files a Defective Demurrer in Response to Somers's 9 Complaint 7 III. LEGAL ANALYSIS 8 10 A. Legal Standard for a Demurrer 8 11 B. Somers Has Adequately Pleaded a Cause of Action for Fraud 9 12 1. Somers Has Adequately Alleged the Elements of Fraud 9 13 a. The promise to convert LC Therapeutics to an LLC 9 b. The promise to use equity as consideration for additional Q 14 cash infusions 11 Z c. The promise to make Somers a full "partner" in LC CQ 15 Therapeutics 12 16 d. The promise to devote time and energy to the success of the company 13 o 17 2. The Allegations Are Pleaded With the Requisite Specificity 13 Q C. Somers Eas Adequately Pleaded a Cause of Action for Negligent 18 Misrepresentation 14 19 D. Somers Has Adequately Pleaded a Cause of Action for Unjust Enrichment 15 20 E. Somers Has Adequately Pleaded a Cause of Action for Breach of Fiduciary Duty 17 21 1. Dr. Longoria Owed Somers a Fiduciary Duty 17 22 2. Somers Adequately Alleged That Dr. Longoria Breached His Fiduciary Duty 19 23 F. In the Event the Demurrer Is Sustained, Somers Requests Leave to Amend 19 24 YV. CONCLUSION 19 25 26 27 28 I52407S.4 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT T A B L E OF AUTHORITIES Page(s) 3 State Court Cases Atascadero v. Merrill Lynch 4 (1998) 68 Cal.App.4th 445 8 California v. William S. Hart Union High Sch. Dist. 5 (2012) 53 Cal.4th 861 8, 9, 15, 16 Cansino v. Bank of America 6 (2014) 224 Cal.App.4th 1469 9, 14 7 Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217 15 8 Cleveland v. Johnson (2012) 209 Cal.App.4th 1315 17, 19 9 Cohen v. S&S ConsL Co. (1983) 151 Cal.App.3d 941 9 10 Comm. on Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 CaL3dl97 17, 19 11 CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631 8 12 Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968 8 l-J 13 Dr. Longoria, Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141 18,19 Q Engalla v. Permanente Med. Grp., Inc. Z 14 (1997) 15 Cal.4th 951 passim 15 F.D.I.C. V. Dintino PQ (2008) 167 Cal.App.4th 333 16 >^ W 16 Fenton v. Groveland Comm. Srvs. Dist. (1982) 135 Cal.App.3d 797 19 O 17 Ghirardo v. Antonioli Q (1996) 14Cal.4th39 16 18 Gray v. Don Miller & Assocs., Inc. (1984) 35 Cal.3d498 11, 15 19 Hayward v. Henderson (1979) 88 Cal.App.3d 64 8, 16 20 Jones V. H.F. Ahmanson & Co. (1969) 1 Cal.3d93 17, 19 21 Newton-Enloe v. Horton (2011) 193 Cal.App.4tii 1480 5 22 Oakland Raiders v. Nat 'I Football League (2005) 131 CaLApp.4th 621 18 23 Richard B. Le Vine, Inc. v. Higashi (2005) 131 Cal.App.4th 566 18 24 Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257 18 25 Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App.4th 216 8 26 Stevens v. Superior Court (1999) 75 Cal.App.4th 594 9 27 Tarmann v. State Farm Mut. Auto. Ins. Co. (1991)2 Cal.App.4th 153 14 28 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAIN!^ 1 TABLE OF AUTHORITIES (continued) 2 Page 3 Tenet Healthsystem Desert, Inc. v. Blue Cross of Cal. (2016) 245 Cal.App.4th 821 14 4 Vai V. Bank of Am. (1961)56Cal.2d329 18 5 State Statutory Authorities 6 Cal. Rules of Court 3.1300 8 Code Civ. Proc. § 435 8 7 Code Civ. Proc. § 452 9 8 9 10 11 12 i-l 13 z 14 < Pi m 15 >^ w 16 Z o 17 Q 18 19 20 21 22 23 24 25 26 27 28 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 I. INTRODUCTION 2 Defendant Dr. Longoria and Plaintiff Charles Somers were business associates and fiiends 3 for approximately eight years before they became business partners in LC Therapeutics ("the 4 company"), a company founded by Dr. Longoria in 2013 and heavily fimded by Somers over the 5 course of several years. Among other things. Dr. Longoria promised Somers that, if Somers 6 became a shareholder. Dr. Longoria would convert the company from an S Corporation to an 7 LLC. Dr. Longoria also promised he would use equity as consideration for additional cash 8 infusions and that Somers could purchase as much equity in the company as he wanted. 9 Moreover, Dr. Longoria promised Somers that if he agreed to loan LC Therapeutics additional 10 capital, Somers would have a full seat at the table and be completely co-equal in terms of all 11 decision making and running all aspects ofthe company. Finally, Dr. Longoria promised that he 12 would devote his time and energy to making the company successful. PL, 13 Unfortunately, Dr. Longoria representations were not tme. Instead of giving Somers the 14 benefit of the bargain he promised, Longoria made himself President, CEO, CFO, and Secretary. oi m 15 He failed to memorialize the terms of Somers's loans and investments in the company, and w 16 quietly failed to memorialize Somers's status as a board member. Today, despite Somers's z o 17 financial contributions of millions of dollars, LC Therapeutics is collapsing. 18 Due to Dr. Longoria's misrepresentations and broken promises, Somers has filed suit 19 against Dr. Longoria, alleging causes of action forfraud,negligent misrepresentation, unjust 20 enrichment, and breach offiduciaryduty. None of Dr. Longoria's legal challenges to the 21 complaint have merit. Somers therefore requests that the Court overrule the demurrer in its 22 entirety. 23 n. FACTUAL ALLEGATIONS CONTAINED IN THE COMPLAINT 24 Somers and Dr. Longoria's Early Relationship and Somers's Initial Investment 25 Dr. Longoria and Somers have known each other since 2005. (Compl. ^ 7.) The two 26 ' Dr. Longoria also requests judicial notice of a petition for dissolution filed in Delaware's Court of Chancery, but he 27 fails to explain how this document is relevant to this Court's ruling on liis demurrer. The Court should therefore deny his request. {Cf. Newton-Enloe v. Horton{20\l) 193 Cal. App.4th 1480, 1493,fii. 3 [declining to take judicial 28 notice of materials "because plaintifTs have not satisfactorily explained the relevance ofthe materials."].) OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 quickly became friends and then business associates in a separate business venture. {Id. ^ 7, 8.) 2 Dr. Longoria eventually informed Somers that he had filed patents for a device called the L Chord 3 and for an RF ablation device, which he claimed would revolutionize several common heart 4 surgeries. {Id. ^ 9.) These patents were owned by Intrepid Medical ("Intrepid"), a company Dr. 5 Longoria had co-founded with his "partner" Roy Chin in April 2013. (Ibid.) The two men were 6 the company's sole shareholders and board members. (Ibid.) 7 In July or August of 2013, Mr. Chin and Dr. Longoria pitched Somers on investing $2 8 million in the company. {Id. 111.) They discussed Intfepid's business plan, and claimed Intrepid 9 would be profitable by 2015. (Ibid.) Dr. Longoria promised that he would fully commit his 10 expertise, time, and energy to making Intrepid a success. (Id. H 14.) Somers initially preferred to 11 loan the company money on conventional terms, (id. f 15), but Dr. Longoria pushed Somers to 12 become a shareholder. (Ibid.) Dr. Longoria not only assured Somers that Intrepid's medical PH 13 devices would be approved by the FDA and proceed to market quickly, but also promised that if Q z 14 and when the company needed additional funding, Somers could purchase additional equity to < CQ 15 whatever extent he wanted. (Ibid.) Because Somers was concemed that the company was an S Z 16 Corporation, Dr. Longoria promised to convert Intrepid to an LLC. {Ibid.) Ultimately, in the fall o 17 of 2013, and in reliance on these representations, Somers agreed to provide start-up capital of $2 18 million, and graciously agreed to became a 20 percent shareholder. (Id. ^ 17.) Shortly thereafter, 19 the company's name was changed to LC Therapeutics. {Ibid.) 20 B. Although Somers Provides the Company With Even More Monev. L C Therapeutics Fails to Live Up to Its Business Plan. 21 22 As time went on, LC Therapeutics failed to execute on its business plan and fell further 23 and further behind on key milestones. (Compl. ^ 18.) Somers grew increasingly concemed, and 24 when Mr. Chin unexpectedly resigned from the company in November 2014, Somers took the 25 opportunity to become a 50 percent shareholder, infusing an additional $1,355 million into the 26 company with his stock purchase. {Id. ^ 22, 23, 24.) Dr. Longoria promised Somers that if he 27 invested additional money, Somers would replace Mr. Chin on the board and that they would be 28 equal "partners" with equal conb-ol over all company decisions. (Id. ^ 23.) Dr. Longoria OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 reiterated that he would devote the time and energy necessary to develop and market the 2 company's patents. {Id. ^ 24.) 3 Despite this cash infusion, the company's situation did not improve. (Compl. ^ 26.) 4 Dr. Longoria approached Somers for even more money, but with Somers already owning 5 50 percent of the company's shares. Dr. Longoria wanted to prevent Somersfromobtaining 6 majority control. Thus, he insisted that Somers instead provide additional funding through loans, 7 ultimately amounting to $3.7 million. (Id. H 27.) Dr. Longoria continued to represent to Somers 8 (as well as to others) that Somers was his "partner" and that he shared equal control of the 9 company (M 29, 31.) ' 10 C. When Somers Refuses to Provide More Monev, Dr. Longoria Changes His Tune. 11 Despite Somers's ongoing infusions of cash and his other efforts to make the company 12 successfijl, LC Therapeutics did not make substantial progress. (Compl. ^ 33, 42.) Somers 13 made clear that he would not continue to fund LC Therapeutics without significant managerial h-l Q Z 14 changes. (Id. Tf 33.) Somers reminded Dr. Longoria of his promises to make the company an < Pi CQ 15 LLC and to raise capital through selling additional equity. (Id. ^ni 33, 36.) But once Somers >H pu 16 made clear that his willingness to fimd LC Therapeutics was not endless. Dr. Longoria began to Z o 17 exclude Somers from business decisions and unilaterally appointed board members without 18 consulting Somers. (Id. 37, 38, 39.) Moreover, in late 2017, Somers leamed that, while 19 Dr. Longoria had repeatedly assured Somers that he would be a co-equal "partner," he had 20 secretly passed a resolution making himself President, CEO, CFO, and Secretary, {id. ^ 39), and 21 that he had failed to formally add Somers to the board. (Id. ^ 40.) Thus, when Somers insisted 22 that Dr. Longoria take certain actions torightthe company's course. Dr. Longoria informed 23 Somers that Somers had no control over the company or its business decisions and had norightto 24 obtain information about Dr. Longoria's unilateral efforts on the company's behalf (Id. ^ 37.) 25 Having infused over $7 million into the company based on promises that tumed out to be false, 26 Somers was left with little choice other than to file this action. 27 D. Dr. Longoria Files a Defective Demurrer in Response to Somers's Complaint. 28 Somers filed his complaint on March 16, 2018, and based on a prior Court order. 1524075.4 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 Dr. Longoria's responsive pleading was due on Jime 21, 2018. (Declaration of Annie S. Amaral 2 ("Amaral Decl.") 2, 3.) Dr. Longoria's demurrer isfile-stampedJune 21, but it is rife with 3 procedural problems. The demurrer was not placed in the mail for service until Jime 25, 2018, 4 which is only 19 days before the hearing on this motion. (Id. T| 4.) Moreover, while the notice of 5 demurrer is dated June 21, the portion of the "notice" setting forth the basis for the demurrer is 6 not only inaccurate, it is dated June 27, and was received by Somers's counsel on July 6. {Id. 7 15.) Accordingly, the demurrer should be stricken or overmled in its entirety, as it was not filed 8 in conformity with the laws of Califomia nor was it served in accordance with this Court's order. 9 (Code Civ. Proc, §§ 435, 1005, subd. (b); Cal. Rules of Court, mle 3.1300.) Additional 10 procedural infirmities also exist. For instance, while the declaration of Dr. Longoria's counsel 11 states that the parties met and conferred on April 18, 2018 (Declaration of Jan Dudensing, 12 June 21, 2018, ^ 3), during that call Dr. Longoria's counsel merely mentioned that she believed OH 13 there were issues with thefraudand breach offiduciaryduty causes of action, and requested 14 fiarther time to analyze whether a demurrer was warranted. (Amaral Decl. ^ 6.) There were no CQ 15 further calls on the subject of any kind. 16 m. LEGAL ANALYSIS O 17 A. Legal Standard for a Demurrer P 18 A demurrer tests the legal sufficiency of the pleading that it challenges. {Salimi v. State 19 Comp. Ins. Fund (1997) 54 Cal.App.4th 216, 219.) Because a demurrer raises only questions of 20 law, it cannot allege facts, deny facts, or allude to extrinsic evidence not subject to judicial notice. 21 (Hayward v. Henderson (1979) 88 Cal.App.3d 64, 71.) Nor can a demurrer be used to determine 22 the tmth of disputed facts or to resolve competing inferences. (CrossTalk Productions, Inc. v. 23 Jacobson (1998) 65 Cal.App.4tii 631, 635; Atascadero v. Merrill Lynch (1998) 68 Cal.App.4th 24 445, 459.) Instead, and for purposes of evaluating the sufficiency of the pleading on demurrer, 25 "all material allegations of the complaint are accepted as tme." (Donabedian v. Mercury Ins. Co. 26 (2004) 116 Cal.App.4th 968, 976.) "To survive a demurrer, the complaint need only allege facts 27 sufficient to state a cause of action; each evidentiary fact that might eventually form part ofthe 28 plaintiffs proof need not be alleged." (California v. William S. Hart Union High Sch. Dist 1524075.4 8 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 (2012) 53 Cal.4th 861, 872.) Indeed, the complaint is to be constmed "liberally.. . with a view 2 to substantial justice between the parties." (Code Civ. Proc, § 452; see Stevens v. Superior Court 3 (1999) 75 Cal.App.4th 594, 601.) To this end, courts "give the complaint a reasonable 4 interpretation, reading it as a whole and its parts in their context." (Hart Union High Sch. Dist, 5 53 Cal.4th at 866 [quotation omitted].) 6 B. Somers Has Adequately Pleaded a Cause of Action for Fraud. 7 1. Somers Has Adequately Alleged the Elements of Fraud. 8 a. The promise to convert LC Therapeutics to an LLC 9 Dr. Longoria contends his promise to convert LC Therapeutics from an S Corporation to 10 an LLC is not an actionable false statement because it is a "vague statement regarding a future 11 possibility." (Mot. at 9.) Not so. While statements about the future that are opinions or 12 predictions are not actionable, {Cohen v. S&S ConsL Co. (1983) 151 Cal.App.3d 941, 201), a 13 statement that expresses the speaker's present intent to take an action in the future is actionable Q Z 14 because the statement describes a fact, (Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th CQ 15 951, 973). "A promise to do something necessarily implies the intention to perform; hence, 16 where a promise is made without such intention, there is an implied misrepresentation of fact that O 17 may be actionable fraud." (Ibid.) Q 18 For example, in Cansino v. Bank of America, the case Dr. Longoria appears to rely upon 19 in support of this argument, the coiut found that representations by the defendant bank's "lending 20 personnel" that the "plaintiffs' property was appreciating and that [the] plaintiffs could obtain 21 several yeai s of appreciation in their property so that they could sell or refinance before having to 22 make higher monthly payments . . ." was a "forecast of fiiture events" and not an actionable 23 misrepresentation. ((2014) 224 Cal.App.4th at 1469.) By contrast here, Somers alleges that when 24 he "raised concerns about the company's status as an 'S' corporation and the resulting tax 25 implications to him" i f he were to become a shareholder, "Dr. Longoria promised that he would 26 convert [the company] to a limited liability company" in an effort to induce Somers to purchase 27 shares in the company rather than loan the company money. (Compl. ^ 15.) This promise was a 28 representation of Dr. Longoria's present intent to take an action in the future. It was made to OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 Somers by Dr. Longoria in between July 2013, when Mr. Chin and Dr. Longoria initially pitched 2 Somers on the company, and September 3, 2013, when Somers provided the company with the 3 first installment of start-up capital in the amount of $1 million. (Compl. tTfl3,17.) Although 4 Dr. Longoria objects that the complaint does not allege when the promised conversion would take 5 place, there is no requirement that this fact be alleged. Somers subsequently reiterated this 6 demand to Dr. Longoria in 2017, and it was only at this point that Dr. Longoria made clear that he 7 would not honor his promise. (Id. ^ 36.) 8 Dr. Longoria next points to the allegation that in the summer of 2017, "Somers also 9 reminded Dr. Longoria of his earlier promise to convert the company from an 'S' corporation to a 10 limited liability company, and Dr. Longoria refused to do so," as a supposed flaw in Somers's 11 cause of action for fraud. He contends that because Somers owned half of the company in 2017, 12 at the time Somers revisited this issue, Somers could have forced the company to be converted to cu h-l hJ 13 an LLC based on his ownership and supposed seat on the board. (Mot. at 22-24.) But this 14 argument goes to whether the company could have been converted to an S Corporation in 2017, 15 not to whether Dr. Longoriafraudulentiyrepresented to Somers in 2013 that he would make this >^ z 16 conversion so that Somers would invest in the company. (Mot. at 9; Compl. ^ 36.) Nor does O 17 Somers's supposed ability to compel the company to take any action in 2017 change the damages Q 18 he suffered as the result of Dr. Longoria'sfraudprior to that time. Accordingly, this argument 19 has no bearing on whether Somers has successfully stated a cause of action forfraudbased on 20 Dr. Longoria's promise that this conversion would be made. 21 Dr. Longoria then appears to claim that, because Somers eventually became a co-equal 22 owner of the company, with "all information available to him and the ability [and] authority" to 23 dictate the terms of his investment, he could not have plausibly relied upon Dr. Longoria's 24 representations at the outset of their business relationship. But Dr. Longoria's attack on Somers's 25 reliance is conclusory and misimderstands the facts. (Mot. at 9.) The complaint establishes that 26 Somers did not own any of the company when Dr. Longoria promised Somers that he would 27 convert the company from an S Corporation to an LLC, that Dr. Longoria made this promise to 28 induce Somers to become a shareholder, and that Somers agreed to purchase shares based on this 1524075.4 .-' 10 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 representation. This is more than sufficient to plead reliance, as "[ajctual reliance occurs when a 2 misrepresentation is 'an immediate cause of [a plaintiffs] conduct, which alters his legal 3 relations,' and when, absent such representation, 'he would not, in all reasonable probability, 4 have entered into the contract or other transaction.'" (Engalla, 15 Cal.4th at 976-977 [quotations 5 and citations omitted].) Critically, "[i]t is not... necessary that [a plaintiffs] reliance upon the 6 tmth of thefraudulentmisrepresentation be the sole or even the predominant or decisive factor in 7 influencing his conduct.... It is enough that the representation has played a substantial part, and 8 so has been a substantial factor, in influencing his decision." (Ibid, [citation omitted].) 9 Moreover, "[w]hether reliance is justified is a question of fact for the determination ofthe trial 10 court." {Gray v. Don Miller & Assocs.. Inc. (1984) 35 Cal.3d 498, 503.) It is therefore generally 11 not suitable for determination on a demurrer, which tests only the legal sufficiency of the 12 pleadings.^ Somers's allegations of reliance are thus more than sufficient to survive PH hJ hJ 13 Dr. Longoria's demurrer. Q 14 b. The promise to use equity as consideration for additional cash infusions Z CQ 15 Dr. Longoria next argues that his representation to Somers in 2013 that the company > 16 would use equity as consideration for additional cash infusions was not a misrepresentation Z o 17 because Somers himself infused additional cash into the company in exchange for equity. (Mot. Q 18 at 10.) This argument misses the point entirely. Somers alleges that, in the fall of 2013, to entice 19 Somers to invest as a shareholder rather than a lender. Dr. Longoriafraudulentlypromised him 20 that "if and when the company needed additional fimding,.. . [the company] would allow him to 21 take advantage o f this stmcture, such that Somers "could purchase additional equity in the 22 company, to whatever extent he was interested." (Compl. ^ 15.) Yet Dr. Longoria later refused 23 to permit Somers to contribute additional funds in exchange for more shares and rejected 24 25 ^ To the extent the Court deems it appropriate to address the reasonableness of Somers's reliance as a matter of law, it is evident that his reliance was reasonable. Somers and Dr. Longoria had known each other for eight years prior to 26 the time that Dr. Longoria initially pitched Somers ou investing in the company, and werefiiends.{Id. ^ 7-8.) They had been involved in a prior business venture together. {Id. ^ 8.) Indeed, they were close enoughfiiendsthat 27 their families spent Thanksgiving together in Hawaii at Somers's home. {Id. ^ 23.) Taking these allegations as true and drawing all inferences in Somers's favor, it is clear that Somers has adequately alleged facts demonstrating that 28 his reliance upon Dr. Longoria's representations was completely reasonable. 1524075.4 11 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 Somers's recommendation that the company sell additional shares to private equity to raise funds, 2 and now the company "is on the brink of collapse." (Id. ^ 33, 42.) The fact that Somers 3 purchased additional shares in the company to become a co-equal shareholder in 2015 does 4 nothing to change the fact that Dr. Longoria later refused to make good on his promise that 5 Somers could "purchase additional equity . . . to whatever extent" he wanted, (Id. ^ 15), and 6 prevented other potential investors from infusing much-needed cash. ^ c. The promise to make Somers a fiill "partner" in LC Therapeutics 8 Dr. Longoria ftirther contends that his repeated promises to Somers that "Somers would 9 share control of the company and that he would become Dr. Longoria's full 'partner' in all 10 business decisions in exchange for his willingness to invest in the company and loan the company 11 millions of dollars," (Compl. f 44(c)), does not support a cause of action forfraudbecause 12 Somers ovraed 50 percent of the company, and was held out as an equal and treated as an equal cu hJ hJ 13 until his relationship with Dr. Longoria deteriorated in the summer of 2017. (Mot. at 10.) But Q Z 14 that is precisely the point. Dr. Longoria initially made it appear to Somers that he had equal CQ 15 control as well as an equal say in the company. He did so in order to entice Somers to continue to 16 make millions in loans to the company. When Somers made clear that no more money was O 17 coming, absent Dr. Longoria making good on his prior promises and. giving Somers additional O 18 control, Dr. Longoria began to exclude Somersfrombusiness decisions, unilaterally appointed a 19 board member, and revealed to Somers that he had secretiy appointed himself to multiple officer 20 positions and Somers was not a tme board member, such that "he could do whatever he chose to 21 do and Somers, as an alleged mere shareholder, could do nothing to stop him." (Compl. ^ 37- 22 39, 42.) Had Dr. Longoria's representations that Somers would be a full "partner" in all business 23 decisions not beenfraudulent.Dr. Longoria would not have excluded Somers, and would not 24 have secretly set up the business to create the argument that he had the ability to do so. 25 Dr. Longoria representations were absolutely material, and Somers clearly alleges that these 26 representations were "an immediate cause of [Somers's] conduct" in investing in LC 27 Therapeutics and loaning the company money, "which alter[ed] his legal relations," and, "absent 28 [this] representation" by Dr. Longoria, Somers "would hot, in all reasonable probability, have 1524075.4 12 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 entered into the . . .fransaction."{Engalla, 15 Cal.4th at 976-977.) 2 c?. The promise to devote time and energy to the success ofthe company 3 Finally, Dr. Longoria takes issue with the cause of action for fraud based on his 4 misrepresentation to Somers that he would "devote time and energy to the success ofthe 5 company, notwithstanding his other commitments." (Compl. Tf 44(b); Mot. at 10.) While 6 Dr. Longoria protests that the complaint does not allege when this representation was made, or 7 the "context" in which it was made, the complaint clearly alleges that Dr. Longoria made this 8 statement between Thanksgiving of 2014, when Somers and Dr. Longoria discussed the terms of 9 Somers's increased equity stake in the company, and January 30, 2015, when Somers purchased 10 $ 1,355,000.00 in LC Therapeutics' stock. {Id. 23-25.) He reiterated this promise at the end of 11 2015, when "he again promised that he would do all that was necessary to make the company 12 successful. . . . " (Id. ^ 26.) And, contrary to Dr. Longoria's argument, the complaint most BH 13 certainly does allege that this promise by Dr. Longoria was a misrepresentation. Somers alleges Q Z 14 that "Dr. Longoria was distracted by his practice and failing to tend to his duties as CEO and CQ 15 Secretary." {Ibid.) Rather than take responsibility for LC Therapeutics' problems, such as >^ W 16 failures of the L Chord, Dr. Longoria "resorted to blaming the product engineers." (Id. T| 28.) Z 17 Because of Dr. Longoria's busy schedule, he had difficulty going to "the Bay Area in order to o Q 18 consult with the manufacturing entities LC [Therapeutics] had contracted with . . . to manufacture 19 the L Chord." (Id. f 31.) Thus, Somers has clearly and specifically alleged numerous examples 20 of Dr. Longoria's failure to devote his time and energy to the company. Of course, this 21 misrepresentation harmed Somers because he relied upon this promise when he agreed to invest 22 more money into the company, (Engalla, 15 Cal.4th at 976-977), and Dr. Longoria's lack of 23 commitment to the company caused the company to stmggle financially, which in tum caused 24 Dr. Longoria to seek even more money from Somers. 25 2. The Allegations Are Pleaded With the Requisite Specificity. 26 Dr. Longoria also contends that Somers's cause of action forfraudfails because Somers 27 purportedly does not allege specific facts regarding the "how, when, where, to whom, and by 28 what means" the alleged misrepresentations were made. Critically, however, the allegations need 1524075,4 13 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 only be sufficient to allow the defendant "to understand fully the nature of the charge made." 2 (See Tarmann v. State Farm MuL Auto. Ins. Co. (1991) 2 Cal.App.4tii 153, 157; see also Tenet 3 Healthsystem Desert, Inc. v. Blue Cross of Cal (2016) 245 Cal.App.4th 821, 838.) "Less 4 specificity in pleadingfraudis required when it appearsfromthe nature of the allegations that the 5 defendant must necessarily possess full information conceming the facts of the controversy . . . . " 6 (Cansino, 224 Cal.App.4th at 1469 [quotation omitted].) And although Dr. Longoria takes issue 7 with the fact that it is unknown in what "capacity" he made certain promises to Somers, this 8 requirement applies only when the cause of action forfraudis brought "against a corporation," 9 not when the cause of action is brought against an individual and merely relates to a corporation. 10 (See Tarmann, 2 Cal.App.4th at 157; Cansino, 224 Cal.App.4tii at 1469.) 11 Here, and as set forth in more detail above, the allegations supporting Somers's fraud 12 cause of action are pleaded with more than adequate specificity. While specific dates and times cu -] 13 are not pleaded, thetimeframesin which these promises were made are readily apparentfromthe Q Z 14 face of the complaint. The cfrcumstances and context of Dr. Longoria's various representations CQ 15 are similarly clear. It is also obviousfromthe allegations that these promises were made directly >^ W 16 by Dr. Longoria to Somers. In short, the allegations regarding Dr. Longoria's actions and z o 17 misrepresentations are not only extremely specific, they are more than adequate for Dr. Longoria Q 18 "to understand fijlly the nature of the charge made." {Tarmann, 2 Cal.App.4th at 157.) 19 c. Somers Has Adequately Pleaded a Cause of Action for Negligent Misrepresentation. 20 Dr. Longoria claims that Somers's cause of action for negligent misrepresentation fails for 21 the same reasons that Somers's cause of action forfraudfails. (Mot. at 12.) But, as explained 22 above, Somers's complaint more than sufficiently states a cause of action forfraud,and his 23 demurrer to the cause of action for negligent misrepresentation on this basis likewise lacks merit. 24 Dr. Longoria further contends that Somers fails to allege that the statements at issue "were 25 made with an improper intent or negligently." (Mot. at 12.) As an altemative to hisfraudclaims, 26 Somers alleges that Dr. Longoria negligently made four specific misrepresentations, and that he 27 made "these representations without any reasonable basis for then tmthfulness . . .." (Compl. 28 H 51.) While Somers primarily alleges that Dr. Longoria's statements were intentional 1524075.4 14 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 misrepresentations, "[t]he essential elements of a count for negligent misrepresentation are the 2 same [as a count forfraud]except that it does not require knowledge of falsity but instead 3 requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to 4 be tine," {Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 231.) It is well settled that a 5 litigant may plead the same cause of action according to different legal theories or different 6 versions of ultimate facts. Indeed, "when for any reason the pleader thinks it desirable so to 7 do,... his pleading may set forth the same cause of action in varied and inconsistent counts with 8 strict legal propriety." (4 Witkin, Cal. Proc. 5tii ed.. Pleading, § 402 (2008).) That is precisely 9 what Somers has done here, as the exact nature of Dr. Longoria's intent at the time he made these 10 representations to Somers is presently undiscovered. Thus, Somers's complaint brings causes of 11 action for bothfraudand negligent misrepresentation. His allegations for negligent 12 misrepresentation are sufficient, as he is not required to plead this cause of action with p^ 13 particularity, nor is he required to allege "each evidentiary fact that might eventually form part of h-l Q Z 14 [his] proof. . . ." {Hart Union High Sch. DisL, 53 Cal.4tii at 872.) Somers's allegations CQ 15 regarding Dr. Longoria's intent are thus sufficient to survive a demurrer. >- U 16 Dr. Longoria finally challenges the adequacy and credibility of Somers's allegations that o 17 he reasonably relied upon Dr. Longoria's misrepresentations. But, as set forth above, a plaintiff Q 18 "actually" relies on a misrepresentation when it plays a substantial role in influencing the 19 plaintiffs actions—i.e., but for the representation, the plaintiff would likely not have behaved in 20 the same way. (Engalla, 15 Cal.4th at 976-977.) The misrepresentation need not be the only or 21 even the predominant factor motivating the plaintiffs actions. It must simply be a substantial 22 influence. (Ibid.) This standard is readily satisfied here. And, again, because the question of 23 reliance one of fact, {Gray, 35 Cal.3d at 503), determining the reasonableness of Somers's 24 reliance is not appropriate on a demurrer. 25 D. Somers Has Adequately Pleaded a Cause of Action for Unjust Enrichment. 26 Next, although Dr. Longoria argues that Somers's cause of action for unjust enrichment is 27 "unintelligible," it is, in reality, quite straightforward: Dr. Longoria was personally and unjustly 28 enriched by the amount of the tax benefits he received at Somers's personal expense. (Mot. 1524075.4 15 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 at 12:22.) More specifically, Somers invested and loaned a total of over $7 million to LC 2 Therapeutics, based in part on Dr. Longoria's promise to convert the company into an LLC from 3 an S Corporation. (Compl. 154.) Dr. Longoria never made this change. {Ibid.) Dr. Longoria 4 received tax savings as the result of LC Therapeutics remaining an S Corporation. {Ibid.) These 5 tax benefits were received by Dr. Longoria at the expense of Somers's investment in the company 6 and at the expense of a tax benefit that Somers would have received had die company been 7 converted to an LLC. (Compl. 54.) These allegations are more than adequate to satisfy the 8 requirements for pleading a cause of action for unjust enrichment, as "[a] person is enriched if he 9 receives a benefit at another's expense," and "[t]he term benefit denotes any form of advantage." 10 {Ghirardo v. Antonioli (1996) 14 Cal.4fli 39, 51 [citation omitted].) 11 Sfrangely, Dr. Longoria also challenges Somers's unjust enrichment cause of action on the 12 basis that it "sounds in confract," but complains that "no confract between Somers and Longoria PH hJ hJ 13 has been alleged . . . . " (Mot. at 13:1.) But that is precisely the fimction of a claim for unjust a 14 enrichment: it exists where there is not a contract between the parties. "[A] cause of action for z 15 unjust enrichment is not based on, and does not otherwise arise out of, a written confract. Rather, >• m 16 unjust enrichment is a common law obligation implied by law based on the equities of a particular Z o 17 case and not on any contractual obhgation." {F.D.I.C. v. Dintino (2008) 167 Cal.App.4th 333, o 18 346 [citation omitted].) "[T]he equitable remedy of restitution when unjust enrichment has 19 occurred is an obligation (not a tme contract [citation]) created by the law without regard to the 20 intention ofthe parties, and is designed to restore the aggrieved party to his or her former position 21 by retum of the thing or its equivalent in money." (Ibid, [omission in original] [quotation 22 omitted].) Thus, Dr. Longoria's challenge on this basis completely lacks merit. 23 Finally, Dr. Longoria launches into a recital of the actions Somers "could have" taken to 24 prevent Dr. Longoriafromreceiving this benefit, or to ensure that the company was converted to 25 an S Corporation. (Mot. at 13:10-16.) These arguments have no bearing on whether "the 26 complaint... al]ege[s] facts sufficient to state a cause of action . .. ." {Hart Union High Sch. 27 DisL, 53 Cal.4th at 872.) Dr. Longoria's efforts to allege and deny facts are misplaced, 28 (Hayward, 88 Cal.App.3d at 71), as Somers's "ability to prove [his] allegations, or the possible 1524075.4 \ 6 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 difficulties in making such proof," has no bearing on the legal sufficiency of his complaint. 2 {Comm. on Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 213-214, 3 superseded by statute on other grounds.) 4 E. Somers Has Adequately Pleaded a Cause of Action for Breach of Fiduciary Dut>'. 5 1. Dr. Longoria Owed Somers a Fiduciary Duty. 6 Dr. Longoria first argues that he owed no fiduciary duty to Somers. "A fiduciary 7 relationship is 'any relation existing between parties to a fransaction wherein one of the parties is 8 in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation 9 ordinarily arises where a confidence is reposed by one person in the integrity of another 10 {Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1338 [quotation omitted].) A fiduciary 11 relationship may be imposed as a matter of law. (Ibid.) As relevant here, relationships in which a 12 fiduciary duty is imposed as a matter of law include the relationship between partners, {Enea v. OH hJ hJ 13 Superior Court (3-D) (2005) 132 Cal.App.4th 1559, 1564), tiie relationship between majority and Q Z 14 minority shareholders, (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108), the relationship DQ 15 between a corporation's directors and officers and its shareholders, (id. at 110.), and the W Z 16 relationship between a corporation's promoter and one who decides to invest in the corporation o 17 based on the promoter's representations, {Cleveland, 209 Cal.App.4th at 1339). (See also Q 18 Marsh's Cal. Corp. L. § 11.01 [officers, directors, promoters, and majority shareholders owe 19 duties to shareholders].) While Somers specifically alleged that Dr. Longoria owed him a 20 fiduciary duty based on his status as CEO of the company and Somers's status as a shareholder, 21 (Compl. % 57), the facts in the complaint also make clear that Dr. Longoria owed Somers a 22 fiduciary duty based on his status as a promoter of the corporation, (id. THJ 9-17), and his position 23 as a member of the board of directors, {id. 9). Well-settled law establishes that as a director, 24 officer, and promoter. Dr. Longoria owed Somers a duty based on Somers's status as a 25 shareholder. {Cleveland, 209 Cal.App.4tii at 1338; Jones, 1 Cal.3d at 108; Marsh's Cal. Corp. L. 26 § 11.01.) Dr. Longoria also owed Somers a duty during the time that Somers was a minority 27 shareholder and Dr. Longoria and Mr. Chin confroUed the company. {Jones, 1 Cal.3d at 108.) 28 In addition to the fiduciary relationships imposed by law, "[a] fiduciary relationship is 1524075.4 17 OPPOSITION TO DEFENDANT'S DEMURRER TO COMPLAINT 1 created where a person r