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BRUCE A. SCHEIDT, State Bar No. 155088
bscheidt@kmtg.com
constott@kmig.com
GABRIEL P. HERRERA, State Bar No. 287093
gherrera@kmtg.com
A Professional Corporation
400 Capitol Mall, 27" Floor
Sacramento, California 95814
Telephone: (916) 321-4500
Facsimile: (916) 321-4555
Attorneys for Plaintiff/Cross-Defendant
GOLDEN PACIFIC BANK, N.A.
GOLDEN PACIFIC BANK, N.A.,
Plaintiff,
v.
BILLFLOAT, INC., RYAN GILBERT, SEAN
O'MALLEY, and DOES 1-50, inclusive,
Defendants.
BILLFLOAT., INC.
Cross-Complainant,
Vv.
GOLDEN PACIFIC BANK, N.A., and ROES
1-50,
Cross-Defendants.
1570319.1 14023-004
CHRISTOPHER ONSTOTT, State Bar No. 225968
KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD
ELECTRONICALLY
FILED
Superior Court of Catifornia,
County of San Francisco
05/25/2017
Clerk of the Court
BY: MADONNA CARANTO
Deputy Clerk
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
Case No. CGC-16-549804
REPLY TO OPPOSITION TO GOLDEN
PACIFIC BANK'S DEMURRER TO
BILLFLOAT, ID
AMENDED CROSS
Judge: Hon. Andrew Y.S. Cheng
Date: June 2, 2017
Time: 10:00 a.m.
Dept.: 606
| Case Transferred
from Sacramento County: — January 11, 2016
Trial Date: August 14, 2017
“REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, ING,S SECOND
AMENDED CROSS-COMPLAINTwa
aa
L INTRODUCTION
BillFloat Inc.'s ("BillFloat") opposition to Golden Pacific Bank, N.A.'s ("GPB") demurrer
to the Second Amended Cross-Complaint ("SACC") makes clear that through its SACC, BillFloat
is attempting to again hold GPB liable for the claims already adjudicated in BillFloat's prior
lawsuit in Contra Costa County ("Contra Costa Action") against the officers and directors of GPB
("Contra Costa Defendants"). BillFloat’s opposition necessarily fails because its patently false
and conclusory assertions of purported distinctions between the pleadings in the Contra Costa
Action and SACC are directly contradicted by the pleadings themselves, as well as its own prior
admissions to this Court. Indeed, BillFloat does not identify any allegedly wrongful conduct by
GPB’s directors and officers in this action that was not alleged in the Contra Costa Action.
Because this Court found that BillFloat’s tort claims in the FACC were barred under the theory of
claim preclusion, BillFloat's 1°, 2", 12", 13", 15", and 16" causes of action in the SACC, which
allege the same facts and legal theories, similarly are barred by the application of res judicata.
Ik. LEGAL ARGUMENT
A, BillFloat Fails to Refute that Its "Alleged Wrongful Acts and Harms Suffered" in the
SACC Are Identical to Those Asserted in the Contra Costa Action
BillFloat fails to refute that its "alleged wrongful acts and harms suffered" in the SACC are
identical to those asserted in the Contra Costa Action. (See Memorandum of Points and
Authorities in Support of Demurrer to SACC ("Demurrer"), 8:16 & 9:4-5.) Rather, BillFloat
contends the SACC and the Contra Costa Action involve different "primary rights" because in the
SACC, GPB "violated the primary right of BillFloat not to be harmed in connection with the
parties’ joint venture" whereas the Contra Costa Action "involved allegations against specific
officers and/or directors of GPB." (Opp., 8:13-16.)1 BillFloat's contention conflates the "primary
right" requirement of res judicata with the "privity" requirement. (See DKN Holdings LLC v.
Faerber (2015) 61 Cal.4th 813, 825 (in an subsequent action against a different party, the fact that
the same wrongful acts and harms suffered was litigated in the prior action is "beside the point" as
| BillFloat improperly uses 32 lines per page in its opposition. Rather than requiring the Court to count
each line, GPB refers to the line numbers the cited lines appear to be between.
1570319.1 1403-004 1
REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC’S SECOND
AMENDED CROSS-COMPLAINTres judicata also requires the actions to involve "the same party").) The fact that the Contra Costa
Action "did not comprise the entire GPB Board of Directors" is of no relevance to the "primary
right" requirement. (See Richard B. Levine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 575
(stating "[e]ven when several defendants cause a single injury to plaintiff ... if there is only one
primary right violated there is only one cause of action").) (Opp., 8:18-22.) Indeed, under the
"primary rights theory." the determinative factor is the harm suffered not who caused the harm.
(See ibid.; see also Boeken y. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 814.) “Even where
there are multiple legal theories upon which recovery might be predicated, one injury gives rise to
only one claim for relief." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 904 (citations
omitted).)
Moreover, the supposed distinction between the SACC and the Contra Costa Action that
the SACC involves GPB violating "the primary right of BillFloat not to be harmed in connection
with the parties’ joint venture" is absurd. Both actions arise from the very same contractual
agreements, including the same purported "joint venture" between GPB and BillFloat. (Compare,
Contra Costa Compl., {¥ 8, 12, 30, 36-45. with SACC, #¥ 61, 66-70.) Indeed, BillFloat sought to
impose liability on the Contra Costa Defendants because they "are Officers and/or Directors of
GPB, and owed and owe fiduciary duties to Better Finance arising out of the joint venture,” which
BillFloat alleged "GPB's Officers and Directors formed ... between GPB and Better Finance."
(Contra Costa Compl, { 8.)
Further conflating the "primary right" analysis with the "privity" analysis, BillFloat claims
the SACC secks relief based on the "collective harm caused by GPB" while the Contra Costa
Action involved "ultra vires actions" that were "expressly or impliedly ratified by the full board of
directors of GPB."2 (Opp., 8:22-9:3, 9:11-17.) BillFloat's conclusory and patently false argument
asks this Court to "close [its] eyes" to contradictory judicially noticeable facts. (See Hoffman v.
2 This Court already rejected BillFloat's argument. BillFloat argued "there are three other board members,
including the Chairman of the Board Richard Claussen, who are integrally involved in making decisions
and controlling the affairs of GPB, and there are others who are no longer affiliated with GPB that have
caused it to engage in the actions alleged herein.” (RJN, Attm. 21, p. 8:14-22; see also RIN, Attm. 19, §
148.)
1570319.1 14023-004 2
~ REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC.'S SECOND
AMENDED CROSS-COMPLAINTSmithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400 (stating courts are not to "close their
eyes as to situations" where a complaint contains “allegations contrary to facts that are judicially
noticed").) Facts raised by GPB in its demurrer that BillFloat completely ignores\, Not a single
allegation in the Contra Costa Action purports to hold the Contra Costa Defendants liable for
actions taken ourside the scope of their authority as officers and directors of GPB. On the
contrary, as noted above, BillFloat sought to impose liability on the Contra Costa Defendants
because they were officers and directors of GPB. (Contra Costa Compl., § 8.) The Contra Costa
Complaint specifically alleged "[a]s a joint venturer, both GPB and [the Contra Costa Defendants],
as its directors, officers, managers, and agents owed and owe Plaintiff Better Finance fiduciary
duties." (Contra Costa Compl., §§ 97, 109.) Likewise, the SACC's own internal inconsistencies
contradict BillFloat's contention, BillFloat admits that it "alleged that the Contra Costa
[Defendants were liable to it as GPB's officers and directors" and "at the very worst, [it]
acknowledged only that it lacked evidence to support a case against the five individual defendants
acting in their official capacities." (See Boeken, supra, 48 Cal.4th at 789-799 (stating the reason
for dismissing the action is of no importance, the only relevant point is what was alleged).)
(SACC, f 166, 168: see also SACC € 170.)
BillFloat's contention is further undermined by BillFloat's representations to the Contra
Costa Court and this Court. After BillFloat’s First Amended Complaint (“FAC”) in this Court
was ordered transferred to Sacramento County, BillFloat dismissed the FAC but admitted that it
was forced to "sever" its FAC into two separate pleadings in two separate proceedings — one
against GPB in the form of a cross-complaint in this action and the other against the individual
officers and directors in the Contra Costa Action - even though it wanted to bring the claims as a
"single cause of action" to avoid duplicitous efforts and the possibility of "conflicting rulings."
(See RIN, Attm. 12, at 5:24-28; Attm. 13, Exhibit 4, p. 3, Attm. 23, Exhibit 5, p. 3: see also
Demurrer, 3:18-5:10.)
BillFloat's apparent slip of the pen expressly concedes that the very same claims were
brought against GPB and the Contra Costa Defendants in two separate forums, the most recent
through its SACC. Indeed, BillFloat explains it dismissed the FAC because it "elected to file its
1870319.1 14023-004 3
~ REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC’S SECOND
AMENDED CROSS-COMPLAINTnN
affirmative claims against GPB and the individual defendants as a cross-complaint in the
pending action." (Opp., 4:15-19.) However, in truth, neither the SACC nor the two prior cross-
complaints that BillFloat filed in the pending action included the individual defendants.
Moreover, as explained by the Contra Costa Court, BillFloat “artificially bifurcat[ed]" its FAC
into a cross complaint against GPB in this action and a separate pleading against the Contra Costa
Defendants in the Contra Costa Action. (See also RJN, Attm 14, at Exh. A, p. 2-3.) BillFloat has
alleged so many different versions of the "facts" that it cannot keep them straight.
BillFloat's further assertion of different "primary rights" is equally unavailing. (See Opp.,
9:24-28.) The purported "primary rights" are merely legal theories that seek redress for the same
harm suffered. (See Boeken, supra, 48 Cal.4th at 814 (stating a "cause of action" relates to the
harm suffered, regardless of the specific remedy sought or the legal theory advanced).) Not a
single additional wrongful act or harm suffered is identified. Each theory advanced is predicated
on the purported harm arising from the parties’ contractual agreements and the alleged "joint
venture." Further, BillFloat fails to provide authority in support of its assertions. While different
"primary rights" can be invaded by the same wrongful conduct, different "primary rights" cannot
be violated if a plaintiff is seeking redress for the exact same "cause of action" or "harm suffered."
(Branson v, Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 341-342; see also ibid.) This is
not an instance where the first action was predicated on statutory indemnity and the later action on
contractual indemnity nor is this an instance where the first action was based on federal statutory
rights and the later action on state law remedies. (See id. at 344; see also Agarwal v. Johnson
(1979) 25 Cal.3d 932, 955.) The Contra Costa Action and the SACC are cases where the alleged
wrongful acts and harms suffered are identical.3 (See Demurrer, 9:4-10:25.) BillFloat's
opposition does nothing to refute those facts.
3 With respect to BillFloat's claim related to the breaches of fiduciary duty alleged in the SACC and the
Contra Costa Action, the exact same facts and harm underlie the claims. (Compare SACC, 4 181-182,
185-186, 191, with Contra Costa Compl., {4 98-100, 102, 107.) BillFlo tatement that the SACC.
includes "two new causes of on" is false. BillFloat merely chose to split its breach of fiduciary duty
claim into two, The FACC's breach of fiduciary duty count included breaches of "its duties of loyalty,
care, confidentiality..." (FACC, § 155.) Similarly, the Contra Costa Action's breach of fiduciary duty
count included breaches of "loyalty, care, confidentiality..." (Contra Costa Compl., § 111.)
1570319.1 (4023-004 4
~~ REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC'S SECOND
AMENDED CROSS-COMPLAINTB. BillFloat Proffers No New Arguments With Respect to the 'Privity" Requirement
1 In sustaining GPB's prior demurrer, this Court already rejected BillFloat's
contention that the Contra Costa Defendants were not sued in their corporate
capacities.
BillFloat's sole argument with respect to the "privity" requirement is that the Contra Costa
Defendants were not sued in their corporate capacities. (Opp., 12:1-5.) This Court already
rejected BillFloat's contention in sustaining GPB's demurrer to the FACC. The Contra Costa
Action was brought against the Contra Costa Defendants acting in their corporate capacities. As
previously discussed, BillFloat's contention is expressly contradicted by the Contra Costa Action,
internal inconsistencies within the SACC itself, and BillFloat's prior admissions. (See infra, ILA;
see also Demurrer, III.A.3.) BillFloat's argument neither refutes nor addresses the facts identified
by GPB. BillFloat simply chooses to ignore them.
Purther, BillFloat's explanation that it sued the Contra Costa Defendants for "alleged
unlawful and ultra vires actions committed outside the scope of their authority as officers and/or
directors of GPB" is factually irreconcilable with its pleadings in the Contra Costa Action. As set
forth above, BillFloat sought to impose liability on the Contra Costa Defendants because they “are
Officers and/or Directors of GPB, and owed and owe fiduciary duties to Better Finance arising out
of the joint venture,” which BillFloat alleged “GPB’s Officers and Directors formed ... between
GPB and Better Finance.” (Contra Costa Compl., 4 8.) The Contra Costa Complaint specifically
alleged "[a]s a joint venturer, both GPB and [the Contra Costa Defendants], as its directors,
Officers, managers, and agents owed and owe Plaintiff Better Finance fiduciary duties,"
(Contra Costa Compl., { 97, 109.) Further, both actions arise from the very same contractual
agreements, including the same purported "joint venture" between GPB and BillFloat. (Compare,
Contra Costa Compl., {f] 8, 12, 30, 36-45, with SACC, {§ 61, 66-70.) It strains credulity to believe
BillFloat's contention that the Contra Costa Action was brought against the Contra Costa
Defendants for ultra vires acts. Not a single allegation in the Contra Costa Action contends the
Contra Costa Defendants acted outside the scope of their authority as officers and directors of
GPB.
5
AMENDED CROSS-COMPLAINT2. BillFloat's argument that "[n]o California court has held that a bank and its
officers and directors are in privity for purposes of res judicata" is nearly
identical to the same argument raised in its opposition to GPB's demurrer to
the FACC,
As set forth in the moving papers, GPB and the Contra Costa Defendants were in privity
for purposes of res judicata because BillFloat sought to impose liability on the Contra Costa
Defendants acting in the scope of their authority as the officers and directors of GPB. "[A]n
officer of a corporation acting in the course of his office is an agent of the corporation; a judgment
in favor of an officer in an action by a third party based on the officer's allegedly wrongful
conduct may have the effect of extinguishing the third person's claim against the corporation.”
(Rest. 2d Judgments, § 59, comm. b.; see also, ¢.g., Garcia Monagas v. De Arellano (Ast Cir.
2012) 674 F.3d 45, 53-54 (stating an individual sued in his corporate capacity is in privity with the
corporation as "[a] suit against individuals in their corporate capacities effectively operates as a
suit against the corporation itself"); Stan Lee Media Inc. y. Lee (C.D.Cal. 2012) 2012 WL
4048871, at *4, aff'd on other grounds (privity between corporation and its officers and directors
where parties “embody the traditional concept of corporation-officer privity"); Headwaters Inc. v.
U.S. Forest Service (9th Cir. 2005) 399 F.3d 1047, 1052-53 ("Privity, traditionally, arose from a
limited number of legal relationships in which two parties have identical or transferred rights with
respect to a particular legal interest, chiefly...corporations and their officers or shareholders");
Friez v. First Am, Bank & Trust of Minot (8th Cir. 2003) 324 F.3d 580, 582 (stating "officers may
be in privity with a corporation if they are named as defendants in their capacity as officers");
Falbaum vy. Pomerantz (2d Cir. 2001) 19 Fed.Appx. 10, 14 (officers and directors in privity with
corporation as they "acted as agents" of corporation); U.S. v. Gurley (8" Cir, 1994) 43 F.3d 1188,
1197 (stating directors and officers may "assert a res judicata defense if they are named as
defendants solely in their" corporate capacity); Amalgamated Sugar Co. v. NL Industries, Inc, (2d
Cir, 1987) 825 F.2d 634, 640-641 (privity found to exist between a corporation's board of directors
and its shareholders).)
BillFloat argues that these authorities are not binding because "[n]o California court has held
that a bank and its officers and directors are in privity for purposes of res judicata.” (Opp., 12:12-
1570319.1 14023-004 6
REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOA’
AMENDED CROSS-COMPLAINT
"S SECOND13:18.) This is the very same argument BillFloat presented in opposition to GPB’s demurrer to the
FACC. (See, RIN, Attm. 21, 9:8-10:20.) Given that the Court sustained GPB's demurrer to the
FACC, BillFloat's repeated argument is of no merit. California's privity standard is derived from the
federal case authorities in the Ninth Circuit, which recognize that an individual sued in her corporate
capacity is in privity with the corporation for res judicata purposes. (See Citizens for Open Access to
Sand and Tide, Inc. v. Seadrift Ass'n (1998) 60 Cal.App.4th 1053, 1070 (citing to United States v.
Geophysical Corp. (9th Cir. 1984) 732 F.2d 693, 697 for the "virtual representative" standard for
privity): see also Headwaters Inc., supra, 399 F.3d at pp. 1052-53; accord, Stan Lee Media, Inc.,
supra, 2012 WI. at p. *4.) The California Supreme Court in DKN Holdings cited to Gottlieb v. Kest
(2006) 141 Cal.App.4th 110, 150 for the "virtual representative" standard. (DKN Holdings, supra, 61
Cal.Ath at p. 388.) Goitlieb in turn cited to Citizens for Open Access to Sand and Tide, Inc. v. Seadrifi
Ass'n (1998) 60 Cal.App.4th 1053, 1070, which relied on the Ninth Circuit's decision in United States
v. Geophysical Corp (9th Cir. 1984) 732 F.2d 693, 697. As such, California's privity standard is the
same as the federal standard. (See Geophysical Corp, supra, 732 F.2d at p. 697 (citing to other
circuits).)
c. BillFloat Ignores Controlling Supreme Court Precedent Determining that a Dismissal
with Prejudice is a Final Judgment on the Merits
Similar to the arguments raised by GPB, BillFloat ignores controlling Supreme Court
precedent determining that a dismissal with prejudice is a final judgment on the merits. (Boeken,
supra, 48 Cal.4th at 793.) Instead, BillFloat relies on a passage from Campanella v. Campanella
(1928) 204 Cal. 515, a 1928 case that was issued prior to the enactment of statutory authority
providing for dismissals "with prejudice." (See Roybal v. University Ford (1989) 207 Cal.App.3d
1080, 1086-1087 (referring to 1947 statutory amendments and stating "[rJelevant language
providing for a plaintiff's voluntary dismissal with prejudice was introduced into section 581 to
limit the plaintiff's leeway to abandon a case and then refile it).) As explained by Roybal and
Boeken, "{t}he statutory term ‘with prejudice’ clearly means the plaintiff's right of action is
terminated and may not be revived.... [A] dismissal with prejudice ... bars any future action on
the same subject matter." (/bid: see also Boeken, supra, 48 Cal.4th at 793.)
1570319.1 14023-004 7
REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK’
AMENDED CROSS-COMPLAINTBillFloat's citation to Hardy v. America's Best Home Loans (2014) 232 Cal.App.4th 795
also carries no weight. Hardy concerned a "dismissal for failure to prosecute." (/d. at 803.)
Hardy did not concern a voluntary dismissal with prejudice. (U/bid.) Accordingly, BillFloat's
dismissal of the Contra Costa Action with prejudice is a judgment on the merits.
D. Leave to Amend Should Not Be Granted
As demonstrated by the SACC and BillFloat’s use of the same arguments that were already
rejected by this Court, amendment would be futile. (Vaillette v. Fireman's Fund Ins. Co. (1993)
18 Cal.App.4th 680, 685.) As conceded by BillFloat in its failure to refute GPB's claims, the
SACC does not provide any additional material allegations of wrongdoing. The SACC merely
includes additional names of members of GPB and amendments devoted to patently false
contentions that are contradicted by BillFloat's SACC, the Contra Costa Action, and BillFloat's
own prior admissions. Had there been additional material allegations of wrongdoing, BillFloat
had an opportunity to allege them. BillFloat failed to do so. As such, leave to amend should not
|| be granted.
Wi. CONCLUSION
Based on the foregoing, the demurrer should be sustained without leave to amend as res
judicata serves to bar BillFloat's 1%, 2°, 12", 13", 15", and 16" causes of action.
Dated: May 24, 2017 KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD
A Professional Corporation f
Mm VV
me (itamee OHS
Bruce A. Scheidt
Attorneys for Plaintiff/Cross-Defendant
GOLDEN PACIFIC BANK, N.A.
1570319.1 14023-004 8
EPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC.
AMENDED CROSS-COMPLAINTPROOF OF SERVICE
STATE OF CALIFORNIA, COUNTY OF SACRAMENTO
At the time of service, I was over 18 years of age and not a party to this action. [am
employed in the County of Sacramento, State of California. My business address is 400 Capitol
Mall, 27th Floor, Sacramento, CA 95814.
On May 25, 2017, I served true copies of the following document(s) described as REPLY
TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT,
INC.'S SECOND AMENDED CROSS-COMPLAINT on the interested parties in this action as
follows:
SEE ATTACHED SERVICE LIST
BY E-MAIL OR ELECTRONIC TRANSMISSION: Based on a court order or an
agreement of the parties to accept service by e-mail or electronic transmission, I caused the
document(s) to be sent from e-mail address bxiong@kmtg.com to the persons at the e-mail
addresses listed in the Service List. I did not receive, within a reasonable time after the
transmission, any electronic message or other indication that the transmission was unsuccessful.
I declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.
Executed on May 25, 2017, at Sacramento, California.
Bao Xiong \ # oN
1570319.1 14023-004 ]
PROOF OF SERVICESERVICE LIST
Golden Pacifie Bank, N.A. v. BillFloat, Inc., Ryan Gilbert, Sean O'Malley
San Francisco Superior Court, Case No. CGC-16-549804
BillFloat, Inc.:
William T. Webb
Jennifer D, Su
155 Montgomery Street, Ste. 1200
San Francisco, CA 94104
: 415-277-7200
abblege
blegalgroup
1570319.1 14023-004
Attorneys for Ryan Gilbert & Sean O'Malley:
Peter L. Isola
Tyler A. Carle
HINSHAW & CULBERTSON LLP
One California Street, 18" Floor
San Francisco, CA 94111
Tel.: 415-362-6000
415-834-9070
Email: @binshawl
2
PROOF OF SERVI
Preview
Co wm NN BRUCE A. SCHEIDT, State Bar No. 155088 bscheidt@kmtg.com constott@kmig.com GABRIEL P. HERRERA, State Bar No. 287093 gherrera@kmtg.com A Professional Corporation 400 Capitol Mall, 27" Floor Sacramento, California 95814 Telephone: (916) 321-4500 Facsimile: (916) 321-4555 Attorneys for Plaintiff/Cross-Defendant GOLDEN PACIFIC BANK, N.A. GOLDEN PACIFIC BANK, N.A., Plaintiff, v. BILLFLOAT, INC., RYAN GILBERT, SEAN O'MALLEY, and DOES 1-50, inclusive, Defendants. BILLFLOAT., INC. Cross-Complainant, Vv. GOLDEN PACIFIC BANK, N.A., and ROES 1-50, Cross-Defendants. 1570319.1 14023-004 CHRISTOPHER ONSTOTT, State Bar No. 225968 KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD ELECTRONICALLY FILED Superior Court of Catifornia, County of San Francisco 05/25/2017 Clerk of the Court BY: MADONNA CARANTO Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN FRANCISCO Case No. CGC-16-549804 REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, ID AMENDED CROSS Judge: Hon. Andrew Y.S. Cheng Date: June 2, 2017 Time: 10:00 a.m. Dept.: 606 | Case Transferred from Sacramento County: — January 11, 2016 Trial Date: August 14, 2017 “REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, ING,S SECOND AMENDED CROSS-COMPLAINTwa aa L INTRODUCTION BillFloat Inc.'s ("BillFloat") opposition to Golden Pacific Bank, N.A.'s ("GPB") demurrer to the Second Amended Cross-Complaint ("SACC") makes clear that through its SACC, BillFloat is attempting to again hold GPB liable for the claims already adjudicated in BillFloat's prior lawsuit in Contra Costa County ("Contra Costa Action") against the officers and directors of GPB ("Contra Costa Defendants"). BillFloat’s opposition necessarily fails because its patently false and conclusory assertions of purported distinctions between the pleadings in the Contra Costa Action and SACC are directly contradicted by the pleadings themselves, as well as its own prior admissions to this Court. Indeed, BillFloat does not identify any allegedly wrongful conduct by GPB’s directors and officers in this action that was not alleged in the Contra Costa Action. Because this Court found that BillFloat’s tort claims in the FACC were barred under the theory of claim preclusion, BillFloat's 1°, 2", 12", 13", 15", and 16" causes of action in the SACC, which allege the same facts and legal theories, similarly are barred by the application of res judicata. Ik. LEGAL ARGUMENT A, BillFloat Fails to Refute that Its "Alleged Wrongful Acts and Harms Suffered" in the SACC Are Identical to Those Asserted in the Contra Costa Action BillFloat fails to refute that its "alleged wrongful acts and harms suffered" in the SACC are identical to those asserted in the Contra Costa Action. (See Memorandum of Points and Authorities in Support of Demurrer to SACC ("Demurrer"), 8:16 & 9:4-5.) Rather, BillFloat contends the SACC and the Contra Costa Action involve different "primary rights" because in the SACC, GPB "violated the primary right of BillFloat not to be harmed in connection with the parties’ joint venture" whereas the Contra Costa Action "involved allegations against specific officers and/or directors of GPB." (Opp., 8:13-16.)1 BillFloat's contention conflates the "primary right" requirement of res judicata with the "privity" requirement. (See DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 825 (in an subsequent action against a different party, the fact that the same wrongful acts and harms suffered was litigated in the prior action is "beside the point" as | BillFloat improperly uses 32 lines per page in its opposition. Rather than requiring the Court to count each line, GPB refers to the line numbers the cited lines appear to be between. 1570319.1 1403-004 1 REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC’S SECOND AMENDED CROSS-COMPLAINTres judicata also requires the actions to involve "the same party").) The fact that the Contra Costa Action "did not comprise the entire GPB Board of Directors" is of no relevance to the "primary right" requirement. (See Richard B. Levine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 575 (stating "[e]ven when several defendants cause a single injury to plaintiff ... if there is only one primary right violated there is only one cause of action").) (Opp., 8:18-22.) Indeed, under the "primary rights theory." the determinative factor is the harm suffered not who caused the harm. (See ibid.; see also Boeken y. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 814.) “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 904 (citations omitted).) Moreover, the supposed distinction between the SACC and the Contra Costa Action that the SACC involves GPB violating "the primary right of BillFloat not to be harmed in connection with the parties’ joint venture" is absurd. Both actions arise from the very same contractual agreements, including the same purported "joint venture" between GPB and BillFloat. (Compare, Contra Costa Compl., {¥ 8, 12, 30, 36-45. with SACC, #¥ 61, 66-70.) Indeed, BillFloat sought to impose liability on the Contra Costa Defendants because they "are Officers and/or Directors of GPB, and owed and owe fiduciary duties to Better Finance arising out of the joint venture,” which BillFloat alleged "GPB's Officers and Directors formed ... between GPB and Better Finance." (Contra Costa Compl, { 8.) Further conflating the "primary right" analysis with the "privity" analysis, BillFloat claims the SACC secks relief based on the "collective harm caused by GPB" while the Contra Costa Action involved "ultra vires actions" that were "expressly or impliedly ratified by the full board of directors of GPB."2 (Opp., 8:22-9:3, 9:11-17.) BillFloat's conclusory and patently false argument asks this Court to "close [its] eyes" to contradictory judicially noticeable facts. (See Hoffman v. 2 This Court already rejected BillFloat's argument. BillFloat argued "there are three other board members, including the Chairman of the Board Richard Claussen, who are integrally involved in making decisions and controlling the affairs of GPB, and there are others who are no longer affiliated with GPB that have caused it to engage in the actions alleged herein.” (RJN, Attm. 21, p. 8:14-22; see also RIN, Attm. 19, § 148.) 1570319.1 14023-004 2 ~ REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC.'S SECOND AMENDED CROSS-COMPLAINTSmithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400 (stating courts are not to "close their eyes as to situations" where a complaint contains “allegations contrary to facts that are judicially noticed").) Facts raised by GPB in its demurrer that BillFloat completely ignores\, Not a single allegation in the Contra Costa Action purports to hold the Contra Costa Defendants liable for actions taken ourside the scope of their authority as officers and directors of GPB. On the contrary, as noted above, BillFloat sought to impose liability on the Contra Costa Defendants because they were officers and directors of GPB. (Contra Costa Compl., § 8.) The Contra Costa Complaint specifically alleged "[a]s a joint venturer, both GPB and [the Contra Costa Defendants], as its directors, officers, managers, and agents owed and owe Plaintiff Better Finance fiduciary duties." (Contra Costa Compl., §§ 97, 109.) Likewise, the SACC's own internal inconsistencies contradict BillFloat's contention, BillFloat admits that it "alleged that the Contra Costa [Defendants were liable to it as GPB's officers and directors" and "at the very worst, [it] acknowledged only that it lacked evidence to support a case against the five individual defendants acting in their official capacities." (See Boeken, supra, 48 Cal.4th at 789-799 (stating the reason for dismissing the action is of no importance, the only relevant point is what was alleged).) (SACC, f 166, 168: see also SACC € 170.) BillFloat's contention is further undermined by BillFloat's representations to the Contra Costa Court and this Court. After BillFloat’s First Amended Complaint (“FAC”) in this Court was ordered transferred to Sacramento County, BillFloat dismissed the FAC but admitted that it was forced to "sever" its FAC into two separate pleadings in two separate proceedings — one against GPB in the form of a cross-complaint in this action and the other against the individual officers and directors in the Contra Costa Action - even though it wanted to bring the claims as a "single cause of action" to avoid duplicitous efforts and the possibility of "conflicting rulings." (See RIN, Attm. 12, at 5:24-28; Attm. 13, Exhibit 4, p. 3, Attm. 23, Exhibit 5, p. 3: see also Demurrer, 3:18-5:10.) BillFloat's apparent slip of the pen expressly concedes that the very same claims were brought against GPB and the Contra Costa Defendants in two separate forums, the most recent through its SACC. Indeed, BillFloat explains it dismissed the FAC because it "elected to file its 1870319.1 14023-004 3 ~ REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC’S SECOND AMENDED CROSS-COMPLAINTnN affirmative claims against GPB and the individual defendants as a cross-complaint in the pending action." (Opp., 4:15-19.) However, in truth, neither the SACC nor the two prior cross- complaints that BillFloat filed in the pending action included the individual defendants. Moreover, as explained by the Contra Costa Court, BillFloat “artificially bifurcat[ed]" its FAC into a cross complaint against GPB in this action and a separate pleading against the Contra Costa Defendants in the Contra Costa Action. (See also RJN, Attm 14, at Exh. A, p. 2-3.) BillFloat has alleged so many different versions of the "facts" that it cannot keep them straight. BillFloat's further assertion of different "primary rights" is equally unavailing. (See Opp., 9:24-28.) The purported "primary rights" are merely legal theories that seek redress for the same harm suffered. (See Boeken, supra, 48 Cal.4th at 814 (stating a "cause of action" relates to the harm suffered, regardless of the specific remedy sought or the legal theory advanced).) Not a single additional wrongful act or harm suffered is identified. Each theory advanced is predicated on the purported harm arising from the parties’ contractual agreements and the alleged "joint venture." Further, BillFloat fails to provide authority in support of its assertions. While different "primary rights" can be invaded by the same wrongful conduct, different "primary rights" cannot be violated if a plaintiff is seeking redress for the exact same "cause of action" or "harm suffered." (Branson v, Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 341-342; see also ibid.) This is not an instance where the first action was predicated on statutory indemnity and the later action on contractual indemnity nor is this an instance where the first action was based on federal statutory rights and the later action on state law remedies. (See id. at 344; see also Agarwal v. Johnson (1979) 25 Cal.3d 932, 955.) The Contra Costa Action and the SACC are cases where the alleged wrongful acts and harms suffered are identical.3 (See Demurrer, 9:4-10:25.) BillFloat's opposition does nothing to refute those facts. 3 With respect to BillFloat's claim related to the breaches of fiduciary duty alleged in the SACC and the Contra Costa Action, the exact same facts and harm underlie the claims. (Compare SACC, 4 181-182, 185-186, 191, with Contra Costa Compl., {4 98-100, 102, 107.) BillFlo tatement that the SACC. includes "two new causes of on" is false. BillFloat merely chose to split its breach of fiduciary duty claim into two, The FACC's breach of fiduciary duty count included breaches of "its duties of loyalty, care, confidentiality..." (FACC, § 155.) Similarly, the Contra Costa Action's breach of fiduciary duty count included breaches of "loyalty, care, confidentiality..." (Contra Costa Compl., § 111.) 1570319.1 (4023-004 4 ~~ REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC'S SECOND AMENDED CROSS-COMPLAINTB. BillFloat Proffers No New Arguments With Respect to the 'Privity" Requirement 1 In sustaining GPB's prior demurrer, this Court already rejected BillFloat's contention that the Contra Costa Defendants were not sued in their corporate capacities. BillFloat's sole argument with respect to the "privity" requirement is that the Contra Costa Defendants were not sued in their corporate capacities. (Opp., 12:1-5.) This Court already rejected BillFloat's contention in sustaining GPB's demurrer to the FACC. The Contra Costa Action was brought against the Contra Costa Defendants acting in their corporate capacities. As previously discussed, BillFloat's contention is expressly contradicted by the Contra Costa Action, internal inconsistencies within the SACC itself, and BillFloat's prior admissions. (See infra, ILA; see also Demurrer, III.A.3.) BillFloat's argument neither refutes nor addresses the facts identified by GPB. BillFloat simply chooses to ignore them. Purther, BillFloat's explanation that it sued the Contra Costa Defendants for "alleged unlawful and ultra vires actions committed outside the scope of their authority as officers and/or directors of GPB" is factually irreconcilable with its pleadings in the Contra Costa Action. As set forth above, BillFloat sought to impose liability on the Contra Costa Defendants because they “are Officers and/or Directors of GPB, and owed and owe fiduciary duties to Better Finance arising out of the joint venture,” which BillFloat alleged “GPB’s Officers and Directors formed ... between GPB and Better Finance.” (Contra Costa Compl., 4 8.) The Contra Costa Complaint specifically alleged "[a]s a joint venturer, both GPB and [the Contra Costa Defendants], as its directors, Officers, managers, and agents owed and owe Plaintiff Better Finance fiduciary duties," (Contra Costa Compl., { 97, 109.) Further, both actions arise from the very same contractual agreements, including the same purported "joint venture" between GPB and BillFloat. (Compare, Contra Costa Compl., {f] 8, 12, 30, 36-45, with SACC, {§ 61, 66-70.) It strains credulity to believe BillFloat's contention that the Contra Costa Action was brought against the Contra Costa Defendants for ultra vires acts. Not a single allegation in the Contra Costa Action contends the Contra Costa Defendants acted outside the scope of their authority as officers and directors of GPB. 5 AMENDED CROSS-COMPLAINT2. BillFloat's argument that "[n]o California court has held that a bank and its officers and directors are in privity for purposes of res judicata" is nearly identical to the same argument raised in its opposition to GPB's demurrer to the FACC, As set forth in the moving papers, GPB and the Contra Costa Defendants were in privity for purposes of res judicata because BillFloat sought to impose liability on the Contra Costa Defendants acting in the scope of their authority as the officers and directors of GPB. "[A]n officer of a corporation acting in the course of his office is an agent of the corporation; a judgment in favor of an officer in an action by a third party based on the officer's allegedly wrongful conduct may have the effect of extinguishing the third person's claim against the corporation.” (Rest. 2d Judgments, § 59, comm. b.; see also, ¢.g., Garcia Monagas v. De Arellano (Ast Cir. 2012) 674 F.3d 45, 53-54 (stating an individual sued in his corporate capacity is in privity with the corporation as "[a] suit against individuals in their corporate capacities effectively operates as a suit against the corporation itself"); Stan Lee Media Inc. y. Lee (C.D.Cal. 2012) 2012 WL 4048871, at *4, aff'd on other grounds (privity between corporation and its officers and directors where parties “embody the traditional concept of corporation-officer privity"); Headwaters Inc. v. U.S. Forest Service (9th Cir. 2005) 399 F.3d 1047, 1052-53 ("Privity, traditionally, arose from a limited number of legal relationships in which two parties have identical or transferred rights with respect to a particular legal interest, chiefly...corporations and their officers or shareholders"); Friez v. First Am, Bank & Trust of Minot (8th Cir. 2003) 324 F.3d 580, 582 (stating "officers may be in privity with a corporation if they are named as defendants in their capacity as officers"); Falbaum vy. Pomerantz (2d Cir. 2001) 19 Fed.Appx. 10, 14 (officers and directors in privity with corporation as they "acted as agents" of corporation); U.S. v. Gurley (8" Cir, 1994) 43 F.3d 1188, 1197 (stating directors and officers may "assert a res judicata defense if they are named as defendants solely in their" corporate capacity); Amalgamated Sugar Co. v. NL Industries, Inc, (2d Cir, 1987) 825 F.2d 634, 640-641 (privity found to exist between a corporation's board of directors and its shareholders).) BillFloat argues that these authorities are not binding because "[n]o California court has held that a bank and its officers and directors are in privity for purposes of res judicata.” (Opp., 12:12- 1570319.1 14023-004 6 REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOA’ AMENDED CROSS-COMPLAINT "S SECOND13:18.) This is the very same argument BillFloat presented in opposition to GPB’s demurrer to the FACC. (See, RIN, Attm. 21, 9:8-10:20.) Given that the Court sustained GPB's demurrer to the FACC, BillFloat's repeated argument is of no merit. California's privity standard is derived from the federal case authorities in the Ninth Circuit, which recognize that an individual sued in her corporate capacity is in privity with the corporation for res judicata purposes. (See Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Ass'n (1998) 60 Cal.App.4th 1053, 1070 (citing to United States v. Geophysical Corp. (9th Cir. 1984) 732 F.2d 693, 697 for the "virtual representative" standard for privity): see also Headwaters Inc., supra, 399 F.3d at pp. 1052-53; accord, Stan Lee Media, Inc., supra, 2012 WI. at p. *4.) The California Supreme Court in DKN Holdings cited to Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 150 for the "virtual representative" standard. (DKN Holdings, supra, 61 Cal.Ath at p. 388.) Goitlieb in turn cited to Citizens for Open Access to Sand and Tide, Inc. v. Seadrifi Ass'n (1998) 60 Cal.App.4th 1053, 1070, which relied on the Ninth Circuit's decision in United States v. Geophysical Corp (9th Cir. 1984) 732 F.2d 693, 697. As such, California's privity standard is the same as the federal standard. (See Geophysical Corp, supra, 732 F.2d at p. 697 (citing to other circuits).) c. BillFloat Ignores Controlling Supreme Court Precedent Determining that a Dismissal with Prejudice is a Final Judgment on the Merits Similar to the arguments raised by GPB, BillFloat ignores controlling Supreme Court precedent determining that a dismissal with prejudice is a final judgment on the merits. (Boeken, supra, 48 Cal.4th at 793.) Instead, BillFloat relies on a passage from Campanella v. Campanella (1928) 204 Cal. 515, a 1928 case that was issued prior to the enactment of statutory authority providing for dismissals "with prejudice." (See Roybal v. University Ford (1989) 207 Cal.App.3d 1080, 1086-1087 (referring to 1947 statutory amendments and stating "[rJelevant language providing for a plaintiff's voluntary dismissal with prejudice was introduced into section 581 to limit the plaintiff's leeway to abandon a case and then refile it).) As explained by Roybal and Boeken, "{t}he statutory term ‘with prejudice’ clearly means the plaintiff's right of action is terminated and may not be revived.... [A] dismissal with prejudice ... bars any future action on the same subject matter." (/bid: see also Boeken, supra, 48 Cal.4th at 793.) 1570319.1 14023-004 7 REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK’ AMENDED CROSS-COMPLAINTBillFloat's citation to Hardy v. America's Best Home Loans (2014) 232 Cal.App.4th 795 also carries no weight. Hardy concerned a "dismissal for failure to prosecute." (/d. at 803.) Hardy did not concern a voluntary dismissal with prejudice. (U/bid.) Accordingly, BillFloat's dismissal of the Contra Costa Action with prejudice is a judgment on the merits. D. Leave to Amend Should Not Be Granted As demonstrated by the SACC and BillFloat’s use of the same arguments that were already rejected by this Court, amendment would be futile. (Vaillette v. Fireman's Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685.) As conceded by BillFloat in its failure to refute GPB's claims, the SACC does not provide any additional material allegations of wrongdoing. The SACC merely includes additional names of members of GPB and amendments devoted to patently false contentions that are contradicted by BillFloat's SACC, the Contra Costa Action, and BillFloat's own prior admissions. Had there been additional material allegations of wrongdoing, BillFloat had an opportunity to allege them. BillFloat failed to do so. As such, leave to amend should not || be granted. Wi. CONCLUSION Based on the foregoing, the demurrer should be sustained without leave to amend as res judicata serves to bar BillFloat's 1%, 2°, 12", 13", 15", and 16" causes of action. Dated: May 24, 2017 KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD A Professional Corporation f Mm VV me (itamee OHS Bruce A. Scheidt Attorneys for Plaintiff/Cross-Defendant GOLDEN PACIFIC BANK, N.A. 1570319.1 14023-004 8 EPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC. AMENDED CROSS-COMPLAINTPROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF SACRAMENTO At the time of service, I was over 18 years of age and not a party to this action. [am employed in the County of Sacramento, State of California. My business address is 400 Capitol Mall, 27th Floor, Sacramento, CA 95814. On May 25, 2017, I served true copies of the following document(s) described as REPLY TO OPPOSITION TO GOLDEN PACIFIC BANK'S DEMURRER TO BILLFLOAT, INC.'S SECOND AMENDED CROSS-COMPLAINT on the interested parties in this action as follows: SEE ATTACHED SERVICE LIST BY E-MAIL OR ELECTRONIC TRANSMISSION: Based on a court order or an agreement of the parties to accept service by e-mail or electronic transmission, I caused the document(s) to be sent from e-mail address bxiong@kmtg.com to the persons at the e-mail addresses listed in the Service List. I did not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on May 25, 2017, at Sacramento, California. Bao Xiong \ # oN 1570319.1 14023-004 ] PROOF OF SERVICESERVICE LIST Golden Pacifie Bank, N.A. v. BillFloat, Inc., Ryan Gilbert, Sean O'Malley San Francisco Superior Court, Case No. CGC-16-549804 BillFloat, Inc.: William T. Webb Jennifer D, Su 155 Montgomery Street, Ste. 1200 San Francisco, CA 94104 : 415-277-7200 abblege blegalgroup 1570319.1 14023-004 Attorneys for Ryan Gilbert & Sean O'Malley: Peter L. Isola Tyler A. Carle HINSHAW & CULBERTSON LLP One California Street, 18" Floor San Francisco, CA 94111 Tel.: 415-362-6000 415-834-9070 Email: @binshawl 2 PROOF OF SERVI