Preview
1 DOWNEY BRAND LLP
WILLIAM R. WARNE (Bar No. 141280)
2 AIWIE S. AMARAL (Bar No. 238189)
BRADLEY C. CARROLL (Bar No. 300658)
3 621 Capitol Mall, 18th Floor
Sacramento, CA 95814-4731
4 Telephone: 916.444.1000
Facsimile: 916.444.2100
5 bwame(@downeybrand.com
aamaral@downeybrand.com
6 bcarroll@downeybrand.com
7 Attomeys for Plaintiff
CHARLES SOMERS, individually and as trustee for the
8 CHARLES SOMERS LIVING TRUST
9 SUPERIOR COURT OF CALIFORNIA
10 COUNTY OF SACRAMENTO
11
12 CHARLES SOMERS, individually and as CASENO. 34-2018-00229212
PH trustee for the CHARLES SOMERS
h-l
13 LIVING TRUST, PLAINTIFF CHARLES SOMERS'S
Q NOTICE OF MOTION AND MOTION TO
14 Plaintiff, F I L E A SECOND AMENDED
COMPLAINT
OQ 15
>
W 16 DR. JAMES LONGORLV, an individual, Date: February 8, 2019
and DOES 1-10, Time: 9:00 a.m.
o 17 Dept.: 54
a Defendant.
18 Complaint Filed: March 16, 2018
Trial Date: TBD D V / I— A W
19 DY rAA
20 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
21 PLEASE TAKE NOTICE that, on Friday, February 8, 2019, at 9:00 a.m., or as soon
22 thereafter as the matter may be heard, in Department 54 of the above-entitled Court, located at
23 813 6th Street, Second Floor, Sacramento, Califomia, 95814, Plaintiff CHARLES SOMERS
24 ("Somers") will, and hereby does, move this Court for an order to file a second amended
25 complaint.
26 This Motion is made pursuant to Code of Civil Procedure Section 473. This Motion will
27 be based on this Notice of Motion and Motion; the accompanying Memorandum of Points and
28 Authorities; the accompanying Declaration of William R. Wame and all exhibits thereto; all of
1542275.2 1
NOTICE OF MOTION
1 the documents and materials set forth in the Court's file in this matter; and on such other
2 argument and oral and documentary evidence as the Court will allow at the time of the hearing on
3 this Motion.
4 Pursuant to Califomia Rules of Court, Rule 3.1324(a)(2), (3), Somers identifies the
5 following deletions and additions to the prior pleading, which are reflected in tracked changes in
6 Exhibit B submitted to this Court.
7 DELETIONS
8
• Paragraph 16: "In the fall of 2013, in another effort to induce Somers to commit to
9 making thisfinancialinvestment. Dr. Longoria assured Somers that, in the unlikely event
that the medical company was not successfiil, he would personally reimburse Somers
10 through the profits Dr. Longoria anticipated receivingfi-omthe minority interest Somers
had created for him in the Montelena real estate investment, which was being held as an
11 investment for sale to future residential developers."
12
• Paragraph 17: "become incorporated in Malaysia in the third"; "and submit"; "in the
o^
13 fourth quarter of 2013."
h-l
14 • Paragraph 19: "he"
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PS
15
• Paragraph 22: "with"; "and that"; "light of these discussions and"; "promises";
> 16 "Longoria's"
17 • Paragraph 23: "to formalize their post-Chin departure"; "executed another 'Common
o Stock Purchase Agreement,' agreeing"; "now each owned"; "his own"; "do so"; "him"
Q 18
• Paragraph 24: "he stepped away from"
19
20 • Paragraph 27: "not as a mere shareholder but instead"
21 • Paragraph 28: "approaching"
22 • Paragraph 29: "confirmed"
23
• Paragraph 34: ", and Dr. Longoria refused to do so"
24
• Paragraph 35: "provide any updates on what he had unilaterally chosen to pursue"; "also
25 told Somers that he was nothing but"
26
• Paragraph 36: "Thereafter,"
27
28
NOTICE OF MOTION
1 • Paragraph 37: "Dr. Longoria's"; "while convincing"; "behind the scenes"; "a way"; "For
instance, on,"; "just after making his promises to Somers in Hawaii over the Thanksgiving
2 holiday to secure more funding. Dr. Longoria passed a secrete resolution making himself
3 LC's"; "kept this"; "a secretfromSomers for more than three years, only revealing it to
Somers"; "in response to"; "revealed the existence of this previously secret"; "Somers is
4 informed and believes that"; "passed this resolution without his knowledge to serve two
purposes"; "(or ostensible)"; "while, at the same time, including Somers to continue
5 providing significant capital while assuring him and others that Somers had co-equal
control as an officer and board member who had taken Mr. Chin's position in the
6 company"
7
• Paragraph 38: "securing"; "million through the January 30, 2015, stock purchase
8 agreement, and despite his status as the company's Secretary"; "did nothing to document
his agreements with Somers. He"; "formally^'; "the reality"; "within the corporate
9 structure of LC"
10 • Paragraph 39: "changed course"; "Somers's"; It was at this point that Dr. Longoria
began pointing to the intemal corporate documents and to the resolution he secretly passed
11 on December 15, 2014, claiming he could do whatever he chose to do and Somers, as an
alleged mere shareholder, could do nothing to stop him."
12
a,
• Paragraph 40: "Because of Longoria's change of course, LC is on the brink of collapse,
13 and"
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14
< • Paragraph 42: "fall"
Oi 15
m • Paragraph 44: "he knew that it was false and"; "ever"
w 16
17 • Paragraph 50: "and/or would not have agreed to provide funds to the company under the
o terms that he did"
Q
18
• Paragraph 58: "infusion"; "did"; "Instead, Dr. Longoria changed course and refused to
19 permit Somers to purchase additional equity in the company"; "would"; "precise"; "and";
"him"; "he had"; "over a barrel"; "that his interest in"; "provide Somers with no choice
20 other than to proceed with loans instead"
21
• Paragraph 64: "promised"; "be"
22
• Paragraph 65: "he"; "allowing"; "to"; "or his equal 'partner' with equal control over the
23 company"
24
• Paragraph 66: "equal"
25
• Paragraph 67: "As Somers discovered in 2017, Dr. Longoria did not make Somers a
26 board member and ultimately did not treat him"; "or permit Somers to exercise equal";
"Instead, on December 15, 2014, Dr. Longoria passed a secret resolution making himself
27
the company's president, CEO, CFO, and Secretary. Thereafter, in the summer of 2017,
28 after Somers made clear that his willingness tofimdthe company was not endless and
NOTICE OF MOTION
1 asserted that he would only provide additional funds to the company through the purchase
of additional shares which would make him the controlling shareholder. Dr. Longoria
2 began to exclude Somers from company decisions."
3
• Former Paragraph 70: Deleted in its entirety.
4
• Paragraph 69: "By executing"
5
6 • Paragraph 70: "and justifiable"; "acted towards"; "confirmed"
7 • Former Paragraphs 73-84: Deleted in their entirety.
8 • Paragraph 71: "providefimdsto the company"; "he would commit his full time and
9 energy to developing and marketing the company's products and making"; "a complete
success"
10
• Paragraph 76(d): Deleted in its entirety.
11
• Paragraph 79: "it"; "between 2013 and 2017. This"; "was"; "and the two had previously
12
(and without incident) prepared to go into business together"
CL,
HJ 13
l-l
• Paragraph 83(b): "understood and agreed early on"; "since learning that LC is on the
Q
14 brink of collapsing, Somers has tried to invoke this understanding and"; "more shares.
< Risking the company's solvency and hanging Somers' investment in the balance"; "this
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oa 15 offer"
>"
Ui 16
2 • Paragraph 83(d): "put his own self-interest over Somers's interests and the
O 17 interests of LC when he passed a secret resolution in his capacity as the sole board
Q member making himself LC's President, CEO, CFO and Secretary, in direct
18 contravention of what he represented to Somers would be the way in which the company
was managed."
19
20 ADDITIONS
• Paragraph 8: "essentially"
21
• Paragraph 15: "orally"; "Somers"
22
• Paragraph 16: "But for those representations, Mr. Somers would not have invested in the
23
enterprise at all."
24
• Paragraph 17: "By September of 2013"; "LC's facility in Malaysia"; "be operational
25 and, by the fourth"; "the same facility was supposed to have submitted"
26
• Paragraph 19: "(Somers)"; "Somers"
27
• Paragraph 22: "immediately"; "and that Somers would immediately obtain"; "of LC";
28 "said"; "orally"; "thereafter"; "In light of Dr. Longoria's representations, Somers was
75.2 4
NOTICE OF MOTION
1 interested, and the two of them continued to discuss the matter through December and into
January. On each occasion, as 2015 approached and 2016 began, Dr. Longoria reiterated
2 to Somers that LC required significant additional funding, that without such funding it
3 would not survive, and that he would immediately give Somers co-equal control, authority
and ownership in exchange for such funding."; "January of 2015, because o f ; "repeated
4 representations and assurances"; "Somers would not have invested these additional fiinds,
and would not have lost these additionalfiinds,but for Dr. Longoria's promises regarding
5 co-equal control, authority, and ownership."; "what"; "Longoria referred to as"
6
• Paragraph 23: "Dr. Longoria and Somers entered into an oral"; "whereby"; "agreed";
7 "would own"; "Dr. Longoria's"; "provide these funds"; "Somers"; "immediately
thereafter"; These oral promises made by Longoria to Somers after Chin's resignation
8 were the "but for cause" of Somers's late January 2013 decision to invest this additional
funding. Because Dr. Longoria served as LC's President, CEO and Secretary, Somers
9 rightfully assumed that Dr. Longoria would see to it that LC's intemal documentation
10 comported with their agreement on all fronts.
11 • Paragraph 24: "Dr. Longoria abandoned"; "now"
12 • Paragraph 25: "and because Longoria's prior representations had already caused Somers
hJ 13 to invest $3 million,"
•J
D 14 • Paragraph 26: "execution and its"
<
oi 15 • Paragraph 27: "Dr. Longoria expressly"; "in LC Therapeutics."
OQ
16
Ui • Paragraph 28: "and with the understanding that he shared equal control ofthe entity";
O 17 "And Somers did so as well in 2018"; "exceeding"
D
18 • Paragraph 29: "seemed to confirm"; "jointiy"
19
• Paragraph 31: "spring and"; "Contrary to his prior assurances,"
20
• Paragraph 34: "On May 3, 2017, Charles had documents forwarded to Dr. Longoria that
21 conformed to Dr. Longoria's promises and that, as such, would convert LC Therapeutics
from an S corporation to an LLC. On May 4, Dr. Longoria responded by stating that his
22 counsel had advised him that he should not sign the document as drafted and that a tax
23 attomey was going to conduct a deeper review and provide potential altematives. Those
altematives were never provided. Indeed, in January of 2018, Dr. Longoria infonned
24 Somers that LC Therapeutics remained a corporation and, contrary to his prior promises
and assurances, that Somers was merely a shareholder."; "has realized and"
25
26 • Paragraph 35: "acknowledge or act on his promises to Somers that he was a director with
equal control of the company. Relatedly, and because of his assertion that Charles was
27 merely a shareholder, he refiised to"; "regarding the licensing issue"; "including Somers
in any of the negotiations he was pursuing on behalf of their jointiy owned, jointiy
28 controlled company,"; "and contrary to Dr. Longoria's earlier promises to Somers";
NOTICE OF MOTION
1 "Specifically, on January 19, 2018," "reiterated his earlier statements in an email to
Somers, saying that 'LC remains a Delaware S Corporation. We each remain 50%
2 shareholders. I remain the sole officer and director. In the same email. Dr. Longoria
stated 'you are solely"; "of said corporation."
3
4 • Paragraph 36: "as a director"; ", and as was his right as a LC board member"
5 • Paragraph 37: "the"; "Dr. Longoria made"; "in order to convince"; "ways"; "were";
"While Somers has recentiy found that he was copied on a"; "email from Longoria which
6 contained a board resolution making Dr. Longoria the sole director,"; "for LC
Therapeutics (an email Somers did not discover until recently), this resolution was the
7 consequence of Roy Chin's resignation from LC on December 6, 2014"; "passed the"; "so
as to confirm the actual status of the corporation at that point, and so that tiie company
8 could properly conduct its business. However, after Dr. Longoria secured Somers's
commitment to provide additional funding for the company an after they entered into their
9 January 30,2015, agreement wherein Somers promised to provide $1.355 million to the
company in exchange for the oral and repeated promises Longoria was making to him in
10 late November, December and January, Dr. Longoria did nothing thereafter to cause LC's
document to comport with Longoria's promises to Somers regarding his status as a
11 director a director of the company. For more than three years, and despite Somers'
decision to provide additional capital to LC in January of 2015, Dr. Longoria never altered
12 this resolution so as to include Somers as a member of the board. Indeed, Dr. Longoria
PL pointed to this 2014 resolution"; "also"; "In response,"; "used tiie December 15, 2014,";
>-l 13 "even though"; "repeatedly promised Somers that he would have equal control over the
Q
company and a board seat if he agreed to fund LC, a promise Somers relied upon in
14 agreeing to fimd LC in 2015. Having failed to make good on his promise to make Somers
< a director, and having failed, as LC's secretary, to create formal documents confirming his
oi
03 15 promises to Somers, Dr. Longoria is now relying upon his pre-agreement resolution of
>- December 15, 2014,"
W 16
• Paragraph 38: "making false promises to secure"; "agreement to provide: "never
O 17 intended to make Somers a director. Thus, Longoria"; "what"
Q
18 • Paragraph 39: "decided to reveal what he always intended - preventing Somers from
ever obtaining equal or majority control of LC Therapeutics. In mid-2017,"; "his"
19
• Paragraph 41: "40 "
20
• Paragraph 42: "months of July and August"; "orally" "during and"
21
• Paragraph 44: "it was his intention to merely go through the motions, much like he did
22 regarding his promises to Somers about being on the board, but that Dr. Longoria,";
"actually'
23
• Paragraph 45: "orally and repeatedly"; "Therapeutics"; "Therapeutics"; "the conversion"
24
• Paragraph 46: "wanted to and"; "Despite these assurances,"
25
• Paragraph 48: "discussions regarding this topic and on his"
26
• Paragraph 49: "eventually"
27
• Paragraph 55: "Shortly before Somers decided to make this initial stock purchase, he
28 orally"
NOTICE OF MOTION
1 • Paragraph 58: "infiisions"; "through stock purchases"; "revealed that he would";
"Contrary to his earlier assurance. Dr. Longoria now informed Somers"; "Somers";
2 "would have little choice but to fUrther commit"; "any hope o f ; "require additional
fiinding"
3
• Paragraph 61: ", but those damages include the amoimt of money that Somers agreed to
4 invest in LC due to Dr. Longoria's false promises."
5 • Paragraph 63: "62 "
6 • Paragraph 64: "began his promises to"; "this"; "immediately become"; Longoria made
this promise orally andfrequentlyto Somers in their face to face discussions, through
7 December and into January of 2015."
8 • Paragraph 65: "thereafter"; "Dr. Longoria"; "that he"; "changing the formal corporate
records of LC Therapeutics to confirm"; "would"
9
• Paragraph 66: "Somers would not have purchased additional shares in LC nor have
10 loaned LC any money but for Dr. Longoria's promise on thisfront,as having at least
equal control was critical to Somers in view of LC's status."
11
• Paragraph 67: "In 2017, shortly after Somers told Dr. Longoria that he
12 would not provide any further funding. Dr. Longoria revealed that he had never made
Cu Somers a director of LC Therapeutics, and that Somers was merely a shareholder. During
hJ
_) 13 the same timeframe, Dr. Longoria dispensed with any pretense and stopped treating
G Somers"; "In fact, Dr. Longoria intentionally excluded Somers while exercising
Z 14 exclusive"; "and its affairs"
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oi
OQ 15 • Paragraph 68: Added in its entirety.
>
Ui
16 • Paragraph 69: "By orally entering"
Z
o 17 • Paragraph 70: "justified and"; "interacted with"; "regarding LC decisions"; "were
Q intended by Dr. Longoria to confirm (falsely)"; "Moreover, Somers's understanding is
18 that the December 15, 2014, Board resolution making Dr. Longoria the sole director.
President, CEO, CFO and Secretary for LC Therapeutics was the consequence of Roy
19 Chin's resignation from LC on December 6, 2014. Dr. Longoria passed the resolution so
as to confimi the actual status of the corporation at that point, and so that the company
20 could properly conduct its business. Thus, despite this resolution, Somers justifiably
believed tiiat Dr. Longoria was going to make him a Board member of LC Therapeutics
21 with equal control over the company."
22 • Paragraph 71: "do so"; "falsely"; "Somers would be a board member and an equal
'partner' with equal control over"
23
• Paragraph 72: ", including damages in the amount of what he invested and/or loaned to
24 LC based on Dr. Longoria's false representations"
25 • Paragraph 74: "73 "
26 • Paragraph 79: "infiising money into the company in the form of stock purchases in 2013
and 2014 and by"; "LC"; "from January of 2016 through September of 2017. Somers's";
27 "on Dr. Longoria's promises"; "made them repeatedly (so long as"; "continued to provide
money) and because Somers trusted Longoria as his"
28
NOTICE OF MOTION
1 • Paragraph 80: "Longoria's negligent misrepresentations, including those damages
associated with investments and loans he would not have made to LC but for"
2
• Paragraph 83(a): "hesitated, blamed his counsel, and then ultimately"; "regarding the
3 highly beneficial treatment he was receiving under our nation's tax law by maintaining LC
as a corporation"
4
• Paragraph 83(b): "specifically promised at the outset of his negotiations with Somers,
5 both in 2013, and again in January of 2015"; "Somers"; "the reformation of the board an
in exchange for more control of LC in the form of shares. Despite Dr. Longoria's earlier
6 promises to the confrary (that Somers would be able to purchase a greater percentage of
the company)"; "Somers's proposal"
7
• Paragraph 83(d): "failed to create intemal records which comported with the promises
8 and assurances he made to Somers in order to secure from Somers significant additional
capital for LC through an agreement signed in January of 2015"
9
• Paragraphs 85-99: Added in their entirety.
10
11 Pursuant to Local Rule 1.06 (A), the Court will make a tentative ruling on the merits of
12 this matter by 2:00 p.m., the court day before the hearing. The complete text of the tentative
Pu
H-l 13 rulings for the department may be downloaded from the Court's public access site. I f you do not
D
Z 14 have online access, you may call the dedicated phone number for the department as referenced in
<
oi
OQ 15 the local telephone directory, between the hours of 2:00 p.m. and 4:00 p.m. on the court day
Ui 16 before the hearing and listen to the tentative mling. If you do not call the court and the opposing
Z
o 17 party by 4:00 p.m. the court day before the hearing, no hearing will be held.
Q
18 DATED: January 8, 2019 DOWNEY BRAND LLP
19
20
W r WILLL\M R. WARNE
21 ANNIE S. AMARAL
BRADLEY C. CARROLL
22 Attomeys for Plaintiff
CHARLES SOMERS, individually and as tmstee
23 for the CHARLES SOMERS LIVING TRUST
24
25
26
27
28
NOTICE OF MOTION
1 PROOF OF SERVICE
2 I am a resident of the State of California, over the age of eighteen years, and not a party to
the within action. My business address is Downey Brand LLP, 621 Capitol Mall, 18th Floor,
3 Sacramento, Califomia, 95814-4731. On January 8, 2019,1 served the within document(s):
4 PLAINTIFF CHARLES SOMERS'S NOTICE OF MOTION AND
MOTION TO F I L E A SECOND AMENDED COMPLAINT
5
BY FAX: by transmitting via facsimile the document(s) listed above to the fax
6 • number(s) set forth below on this date before 5:00 p.m.
7 BY E-MAIL: by transmitting via my electronic service address
• (tchacon@downeybrand.com) the document(s) listed above to the person(s) at the
8 e-mail address(es) set forth below.
9 BY M A I L : by placing the document(s) listed above in a sealed envelope with
• postage thereon fully prepaid, in the United States mail at Sacramento, Califomia
10 addressed as set fortii below.
11 BY OVERNIGHT M A I L : by causing document(s) to be picked up by an
ovemight delivery service company for delivery to the addressee(s) on the next
12 business day.
PU
J 13 BY PERSONAL DELIVERY: by causing personal delivery by On Demand
Q
• Legal of the document(s) listed above to the person(s) at the address(es) set forth
Z 14 below.
OQ 15 Attorneys for Defendant. DR. JAMES LONGORIA
>- Port J. Parker
Ui 16
Z PARKER LAW GROUP
o 17 555 Capitol Mall, Suite 1230
Q Sacramento, CA 95814
18 Ph: (916)996-0400
Fx: (916) 498-1246
19
20 I am readily familiar with the firm's practice of collection and processing correspondence
for mailing. Under that practice it would be deposited with the U.S. Postal Service on tiiat same
21 day with postage thereon fully prepaid in the ordinary course of business. I am aware that on
motion of the party served, service is presumed invalid if postal cancellation date or postage
meter date is more than one day after date of deposit for mailing in affidavit.
22
I declare under penalty of perjury imder the laws of the State of Califomia that the above
23
is tme and correct.
24 Executed on January 8, 2019, at Sacramento, Califomia.
25
26
27
28
PROOF OF SERVICE
Preview
1 DOWNEY BRAND LLP WILLIAM R. WARNE (Bar No. 141280) 2 AIWIE S. AMARAL (Bar No. 238189) BRADLEY C. CARROLL (Bar No. 300658) 3 621 Capitol Mall, 18th Floor Sacramento, CA 95814-4731 4 Telephone: 916.444.1000 Facsimile: 916.444.2100 5 bwame(@downeybrand.com aamaral@downeybrand.com 6 bcarroll@downeybrand.com 7 Attomeys for Plaintiff CHARLES SOMERS, individually and as trustee for the 8 CHARLES SOMERS LIVING TRUST 9 SUPERIOR COURT OF CALIFORNIA 10 COUNTY OF SACRAMENTO 11 12 CHARLES SOMERS, individually and as CASENO. 34-2018-00229212 PH trustee for the CHARLES SOMERS h-l 13 LIVING TRUST, PLAINTIFF CHARLES SOMERS'S Q NOTICE OF MOTION AND MOTION TO 14 Plaintiff, F I L E A SECOND AMENDED COMPLAINT OQ 15 > W 16 DR. JAMES LONGORLV, an individual, Date: February 8, 2019 and DOES 1-10, Time: 9:00 a.m. o 17 Dept.: 54 a Defendant. 18 Complaint Filed: March 16, 2018 Trial Date: TBD D V / I— A W 19 DY rAA 20 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: 21 PLEASE TAKE NOTICE that, on Friday, February 8, 2019, at 9:00 a.m., or as soon 22 thereafter as the matter may be heard, in Department 54 of the above-entitled Court, located at 23 813 6th Street, Second Floor, Sacramento, Califomia, 95814, Plaintiff CHARLES SOMERS 24 ("Somers") will, and hereby does, move this Court for an order to file a second amended 25 complaint. 26 This Motion is made pursuant to Code of Civil Procedure Section 473. This Motion will 27 be based on this Notice of Motion and Motion; the accompanying Memorandum of Points and 28 Authorities; the accompanying Declaration of William R. Wame and all exhibits thereto; all of 1542275.2 1 NOTICE OF MOTION 1 the documents and materials set forth in the Court's file in this matter; and on such other 2 argument and oral and documentary evidence as the Court will allow at the time of the hearing on 3 this Motion. 4 Pursuant to Califomia Rules of Court, Rule 3.1324(a)(2), (3), Somers identifies the 5 following deletions and additions to the prior pleading, which are reflected in tracked changes in 6 Exhibit B submitted to this Court. 7 DELETIONS 8 • Paragraph 16: "In the fall of 2013, in another effort to induce Somers to commit to 9 making thisfinancialinvestment. Dr. Longoria assured Somers that, in the unlikely event that the medical company was not successfiil, he would personally reimburse Somers 10 through the profits Dr. Longoria anticipated receivingfi-omthe minority interest Somers had created for him in the Montelena real estate investment, which was being held as an 11 investment for sale to future residential developers." 12 • Paragraph 17: "become incorporated in Malaysia in the third"; "and submit"; "in the o^ 13 fourth quarter of 2013." h-l 14 • Paragraph 19: "he" < PS 15 • Paragraph 22: "with"; "and that"; "light of these discussions and"; "promises"; > 16 "Longoria's" 17 • Paragraph 23: "to formalize their post-Chin departure"; "executed another 'Common o Stock Purchase Agreement,' agreeing"; "now each owned"; "his own"; "do so"; "him" Q 18 • Paragraph 24: "he stepped away from" 19 20 • Paragraph 27: "not as a mere shareholder but instead" 21 • Paragraph 28: "approaching" 22 • Paragraph 29: "confirmed" 23 • Paragraph 34: ", and Dr. Longoria refused to do so" 24 • Paragraph 35: "provide any updates on what he had unilaterally chosen to pursue"; "also 25 told Somers that he was nothing but" 26 • Paragraph 36: "Thereafter," 27 28 NOTICE OF MOTION 1 • Paragraph 37: "Dr. Longoria's"; "while convincing"; "behind the scenes"; "a way"; "For instance, on,"; "just after making his promises to Somers in Hawaii over the Thanksgiving 2 holiday to secure more funding. Dr. Longoria passed a secrete resolution making himself 3 LC's"; "kept this"; "a secretfromSomers for more than three years, only revealing it to Somers"; "in response to"; "revealed the existence of this previously secret"; "Somers is 4 informed and believes that"; "passed this resolution without his knowledge to serve two purposes"; "(or ostensible)"; "while, at the same time, including Somers to continue 5 providing significant capital while assuring him and others that Somers had co-equal control as an officer and board member who had taken Mr. Chin's position in the 6 company" 7 • Paragraph 38: "securing"; "million through the January 30, 2015, stock purchase 8 agreement, and despite his status as the company's Secretary"; "did nothing to document his agreements with Somers. He"; "formally^'; "the reality"; "within the corporate 9 structure of LC" 10 • Paragraph 39: "changed course"; "Somers's"; It was at this point that Dr. Longoria began pointing to the intemal corporate documents and to the resolution he secretly passed 11 on December 15, 2014, claiming he could do whatever he chose to do and Somers, as an alleged mere shareholder, could do nothing to stop him." 12 a, • Paragraph 40: "Because of Longoria's change of course, LC is on the brink of collapse, 13 and" Q 14 < • Paragraph 42: "fall" Oi 15 m • Paragraph 44: "he knew that it was false and"; "ever" w 16 17 • Paragraph 50: "and/or would not have agreed to provide funds to the company under the o terms that he did" Q 18 • Paragraph 58: "infusion"; "did"; "Instead, Dr. Longoria changed course and refused to 19 permit Somers to purchase additional equity in the company"; "would"; "precise"; "and"; "him"; "he had"; "over a barrel"; "that his interest in"; "provide Somers with no choice 20 other than to proceed with loans instead" 21 • Paragraph 64: "promised"; "be" 22 • Paragraph 65: "he"; "allowing"; "to"; "or his equal 'partner' with equal control over the 23 company" 24 • Paragraph 66: "equal" 25 • Paragraph 67: "As Somers discovered in 2017, Dr. Longoria did not make Somers a 26 board member and ultimately did not treat him"; "or permit Somers to exercise equal"; "Instead, on December 15, 2014, Dr. Longoria passed a secret resolution making himself 27 the company's president, CEO, CFO, and Secretary. Thereafter, in the summer of 2017, 28 after Somers made clear that his willingness tofimdthe company was not endless and NOTICE OF MOTION 1 asserted that he would only provide additional funds to the company through the purchase of additional shares which would make him the controlling shareholder. Dr. Longoria 2 began to exclude Somers from company decisions." 3 • Former Paragraph 70: Deleted in its entirety. 4 • Paragraph 69: "By executing" 5 6 • Paragraph 70: "and justifiable"; "acted towards"; "confirmed" 7 • Former Paragraphs 73-84: Deleted in their entirety. 8 • Paragraph 71: "providefimdsto the company"; "he would commit his full time and 9 energy to developing and marketing the company's products and making"; "a complete success" 10 • Paragraph 76(d): Deleted in its entirety. 11 • Paragraph 79: "it"; "between 2013 and 2017. This"; "was"; "and the two had previously 12 (and without incident) prepared to go into business together" CL, HJ 13 l-l • Paragraph 83(b): "understood and agreed early on"; "since learning that LC is on the Q 14 brink of collapsing, Somers has tried to invoke this understanding and"; "more shares. < Risking the company's solvency and hanging Somers' investment in the balance"; "this oi oa 15 offer" >" Ui 16 2 • Paragraph 83(d): "put his own self-interest over Somers's interests and the O 17 interests of LC when he passed a secret resolution in his capacity as the sole board Q member making himself LC's President, CEO, CFO and Secretary, in direct 18 contravention of what he represented to Somers would be the way in which the company was managed." 19 20 ADDITIONS • Paragraph 8: "essentially" 21 • Paragraph 15: "orally"; "Somers" 22 • Paragraph 16: "But for those representations, Mr. Somers would not have invested in the 23 enterprise at all." 24 • Paragraph 17: "By September of 2013"; "LC's facility in Malaysia"; "be operational 25 and, by the fourth"; "the same facility was supposed to have submitted" 26 • Paragraph 19: "(Somers)"; "Somers" 27 • Paragraph 22: "immediately"; "and that Somers would immediately obtain"; "of LC"; 28 "said"; "orally"; "thereafter"; "In light of Dr. Longoria's representations, Somers was 75.2 4 NOTICE OF MOTION 1 interested, and the two of them continued to discuss the matter through December and into January. On each occasion, as 2015 approached and 2016 began, Dr. Longoria reiterated 2 to Somers that LC required significant additional funding, that without such funding it 3 would not survive, and that he would immediately give Somers co-equal control, authority and ownership in exchange for such funding."; "January of 2015, because o f ; "repeated 4 representations and assurances"; "Somers would not have invested these additional fiinds, and would not have lost these additionalfiinds,but for Dr. Longoria's promises regarding 5 co-equal control, authority, and ownership."; "what"; "Longoria referred to as" 6 • Paragraph 23: "Dr. Longoria and Somers entered into an oral"; "whereby"; "agreed"; 7 "would own"; "Dr. Longoria's"; "provide these funds"; "Somers"; "immediately thereafter"; These oral promises made by Longoria to Somers after Chin's resignation 8 were the "but for cause" of Somers's late January 2013 decision to invest this additional funding. Because Dr. Longoria served as LC's President, CEO and Secretary, Somers 9 rightfully assumed that Dr. Longoria would see to it that LC's intemal documentation 10 comported with their agreement on all fronts. 11 • Paragraph 24: "Dr. Longoria abandoned"; "now" 12 • Paragraph 25: "and because Longoria's prior representations had already caused Somers hJ 13 to invest $3 million," •J D 14 • Paragraph 26: "execution and its" < oi 15 • Paragraph 27: "Dr. Longoria expressly"; "in LC Therapeutics." OQ 16 Ui • Paragraph 28: "and with the understanding that he shared equal control ofthe entity"; O 17 "And Somers did so as well in 2018"; "exceeding" D 18 • Paragraph 29: "seemed to confirm"; "jointiy" 19 • Paragraph 31: "spring and"; "Contrary to his prior assurances," 20 • Paragraph 34: "On May 3, 2017, Charles had documents forwarded to Dr. Longoria that 21 conformed to Dr. Longoria's promises and that, as such, would convert LC Therapeutics from an S corporation to an LLC. On May 4, Dr. Longoria responded by stating that his 22 counsel had advised him that he should not sign the document as drafted and that a tax 23 attomey was going to conduct a deeper review and provide potential altematives. Those altematives were never provided. Indeed, in January of 2018, Dr. Longoria infonned 24 Somers that LC Therapeutics remained a corporation and, contrary to his prior promises and assurances, that Somers was merely a shareholder."; "has realized and" 25 26 • Paragraph 35: "acknowledge or act on his promises to Somers that he was a director with equal control of the company. Relatedly, and because of his assertion that Charles was 27 merely a shareholder, he refiised to"; "regarding the licensing issue"; "including Somers in any of the negotiations he was pursuing on behalf of their jointiy owned, jointiy 28 controlled company,"; "and contrary to Dr. Longoria's earlier promises to Somers"; NOTICE OF MOTION 1 "Specifically, on January 19, 2018," "reiterated his earlier statements in an email to Somers, saying that 'LC remains a Delaware S Corporation. We each remain 50% 2 shareholders. I remain the sole officer and director. In the same email. Dr. Longoria stated 'you are solely"; "of said corporation." 3 4 • Paragraph 36: "as a director"; ", and as was his right as a LC board member" 5 • Paragraph 37: "the"; "Dr. Longoria made"; "in order to convince"; "ways"; "were"; "While Somers has recentiy found that he was copied on a"; "email from Longoria which 6 contained a board resolution making Dr. Longoria the sole director,"; "for LC Therapeutics (an email Somers did not discover until recently), this resolution was the 7 consequence of Roy Chin's resignation from LC on December 6, 2014"; "passed the"; "so as to confirm the actual status of the corporation at that point, and so that tiie company 8 could properly conduct its business. However, after Dr. Longoria secured Somers's commitment to provide additional funding for the company an after they entered into their 9 January 30,2015, agreement wherein Somers promised to provide $1.355 million to the company in exchange for the oral and repeated promises Longoria was making to him in 10 late November, December and January, Dr. Longoria did nothing thereafter to cause LC's document to comport with Longoria's promises to Somers regarding his status as a 11 director a director of the company. For more than three years, and despite Somers' decision to provide additional capital to LC in January of 2015, Dr. Longoria never altered 12 this resolution so as to include Somers as a member of the board. Indeed, Dr. Longoria PL pointed to this 2014 resolution"; "also"; "In response,"; "used tiie December 15, 2014,"; >-l 13 "even though"; "repeatedly promised Somers that he would have equal control over the Q company and a board seat if he agreed to fund LC, a promise Somers relied upon in 14 agreeing to fimd LC in 2015. Having failed to make good on his promise to make Somers < a director, and having failed, as LC's secretary, to create formal documents confirming his oi 03 15 promises to Somers, Dr. Longoria is now relying upon his pre-agreement resolution of >- December 15, 2014," W 16 • Paragraph 38: "making false promises to secure"; "agreement to provide: "never O 17 intended to make Somers a director. Thus, Longoria"; "what" Q 18 • Paragraph 39: "decided to reveal what he always intended - preventing Somers from ever obtaining equal or majority control of LC Therapeutics. In mid-2017,"; "his" 19 • Paragraph 41: "40 " 20 • Paragraph 42: "months of July and August"; "orally" "during and" 21 • Paragraph 44: "it was his intention to merely go through the motions, much like he did 22 regarding his promises to Somers about being on the board, but that Dr. Longoria,"; "actually' 23 • Paragraph 45: "orally and repeatedly"; "Therapeutics"; "Therapeutics"; "the conversion" 24 • Paragraph 46: "wanted to and"; "Despite these assurances," 25 • Paragraph 48: "discussions regarding this topic and on his" 26 • Paragraph 49: "eventually" 27 • Paragraph 55: "Shortly before Somers decided to make this initial stock purchase, he 28 orally" NOTICE OF MOTION 1 • Paragraph 58: "infiisions"; "through stock purchases"; "revealed that he would"; "Contrary to his earlier assurance. Dr. Longoria now informed Somers"; "Somers"; 2 "would have little choice but to fUrther commit"; "any hope o f ; "require additional fiinding" 3 • Paragraph 61: ", but those damages include the amoimt of money that Somers agreed to 4 invest in LC due to Dr. Longoria's false promises." 5 • Paragraph 63: "62 " 6 • Paragraph 64: "began his promises to"; "this"; "immediately become"; Longoria made this promise orally andfrequentlyto Somers in their face to face discussions, through 7 December and into January of 2015." 8 • Paragraph 65: "thereafter"; "Dr. Longoria"; "that he"; "changing the formal corporate records of LC Therapeutics to confirm"; "would" 9 • Paragraph 66: "Somers would not have purchased additional shares in LC nor have 10 loaned LC any money but for Dr. Longoria's promise on thisfront,as having at least equal control was critical to Somers in view of LC's status." 11 • Paragraph 67: "In 2017, shortly after Somers told Dr. Longoria that he 12 would not provide any further funding. Dr. Longoria revealed that he had never made Cu Somers a director of LC Therapeutics, and that Somers was merely a shareholder. During hJ _) 13 the same timeframe, Dr. Longoria dispensed with any pretense and stopped treating G Somers"; "In fact, Dr. Longoria intentionally excluded Somers while exercising Z 14 exclusive"; "and its affairs" < oi OQ 15 • Paragraph 68: Added in its entirety. > Ui 16 • Paragraph 69: "By orally entering" Z o 17 • Paragraph 70: "justified and"; "interacted with"; "regarding LC decisions"; "were Q intended by Dr. Longoria to confirm (falsely)"; "Moreover, Somers's understanding is 18 that the December 15, 2014, Board resolution making Dr. Longoria the sole director. President, CEO, CFO and Secretary for LC Therapeutics was the consequence of Roy 19 Chin's resignation from LC on December 6, 2014. Dr. Longoria passed the resolution so as to confimi the actual status of the corporation at that point, and so that the company 20 could properly conduct its business. Thus, despite this resolution, Somers justifiably believed tiiat Dr. Longoria was going to make him a Board member of LC Therapeutics 21 with equal control over the company." 22 • Paragraph 71: "do so"; "falsely"; "Somers would be a board member and an equal 'partner' with equal control over" 23 • Paragraph 72: ", including damages in the amount of what he invested and/or loaned to 24 LC based on Dr. Longoria's false representations" 25 • Paragraph 74: "73 " 26 • Paragraph 79: "infiising money into the company in the form of stock purchases in 2013 and 2014 and by"; "LC"; "from January of 2016 through September of 2017. Somers's"; 27 "on Dr. Longoria's promises"; "made them repeatedly (so long as"; "continued to provide money) and because Somers trusted Longoria as his" 28 NOTICE OF MOTION 1 • Paragraph 80: "Longoria's negligent misrepresentations, including those damages associated with investments and loans he would not have made to LC but for" 2 • Paragraph 83(a): "hesitated, blamed his counsel, and then ultimately"; "regarding the 3 highly beneficial treatment he was receiving under our nation's tax law by maintaining LC as a corporation" 4 • Paragraph 83(b): "specifically promised at the outset of his negotiations with Somers, 5 both in 2013, and again in January of 2015"; "Somers"; "the reformation of the board an in exchange for more control of LC in the form of shares. Despite Dr. Longoria's earlier 6 promises to the confrary (that Somers would be able to purchase a greater percentage of the company)"; "Somers's proposal" 7 • Paragraph 83(d): "failed to create intemal records which comported with the promises 8 and assurances he made to Somers in order to secure from Somers significant additional capital for LC through an agreement signed in January of 2015" 9 • Paragraphs 85-99: Added in their entirety. 10 11 Pursuant to Local Rule 1.06 (A), the Court will make a tentative ruling on the merits of 12 this matter by 2:00 p.m., the court day before the hearing. The complete text of the tentative Pu H-l 13 rulings for the department may be downloaded from the Court's public access site. I f you do not D Z 14 have online access, you may call the dedicated phone number for the department as referenced in < oi OQ 15 the local telephone directory, between the hours of 2:00 p.m. and 4:00 p.m. on the court day Ui 16 before the hearing and listen to the tentative mling. If you do not call the court and the opposing Z o 17 party by 4:00 p.m. the court day before the hearing, no hearing will be held. Q 18 DATED: January 8, 2019 DOWNEY BRAND LLP 19 20 W r WILLL\M R. WARNE 21 ANNIE S. AMARAL BRADLEY C. CARROLL 22 Attomeys for Plaintiff CHARLES SOMERS, individually and as tmstee 23 for the CHARLES SOMERS LIVING TRUST 24 25 26 27 28 NOTICE OF MOTION 1 PROOF OF SERVICE 2 I am a resident of the State of California, over the age of eighteen years, and not a party to the within action. My business address is Downey Brand LLP, 621 Capitol Mall, 18th Floor, 3 Sacramento, Califomia, 95814-4731. On January 8, 2019,1 served the within document(s): 4 PLAINTIFF CHARLES SOMERS'S NOTICE OF MOTION AND MOTION TO F I L E A SECOND AMENDED COMPLAINT 5 BY FAX: by transmitting via facsimile the document(s) listed above to the fax 6 • number(s) set forth below on this date before 5:00 p.m. 7 BY E-MAIL: by transmitting via my electronic service address • (tchacon@downeybrand.com) the document(s) listed above to the person(s) at the 8 e-mail address(es) set forth below. 9 BY M A I L : by placing the document(s) listed above in a sealed envelope with • postage thereon fully prepaid, in the United States mail at Sacramento, Califomia 10 addressed as set fortii below. 11 BY OVERNIGHT M A I L : by causing document(s) to be picked up by an ovemight delivery service company for delivery to the addressee(s) on the next 12 business day. PU J 13 BY PERSONAL DELIVERY: by causing personal delivery by On Demand Q • Legal of the document(s) listed above to the person(s) at the address(es) set forth Z 14 below. OQ 15 Attorneys for Defendant. DR. JAMES LONGORIA >- Port J. Parker Ui 16 Z PARKER LAW GROUP o 17 555 Capitol Mall, Suite 1230 Q Sacramento, CA 95814 18 Ph: (916)996-0400 Fx: (916) 498-1246 19 20 I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on tiiat same 21 day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. 22 I declare under penalty of perjury imder the laws of the State of Califomia that the above 23 is tme and correct. 24 Executed on January 8, 2019, at Sacramento, Califomia. 25 26 27 28 PROOF OF SERVICE