Hovik Nazaryan vs. Femtometrix, Inc.

Reply Other

Cal. Super. - 4th Dist.June 23, 2015

wv ~~ W N OO 0 N N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FAISAL M. ZUBAIRI (SBN 244233) zubairi.faisal@dorsey.com LYNNDA A. MCGLINN (SBN 161756) mcglinn.lynnda@dorsey.com DORSEY & WHITNEY LLP 600 Anton Boulevard, Suite 2000 Costa Mesa, CA 92626-7655 Telephone: (714) 800-1400 Facsimile: (714) 800-1499 Attorneys for Defendants FEMTOMETRIX, INC., ALON RAPHAEL, BRIAN LARZELERE, JOHN CHANGALA, TYLER RUBIN and TOM ROLFES ELECTRONICALLY FILED Superior Court of California, County of Orange 02/22/2016 at 01:55:00 Pi Clerk of the Superior Court By & Clerk, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE HOVIK NAZARYAN, an individual, Plaintiff, V. FEMTOMETRIX, INC., a Delaware corporation, ALON RAPHAEL, an individual, BRIAN LARZELERE, an individual, JOHN CHANGALA, an individual, TYLER RUBIN, an individual, TOM ROLFES, an individual, and DOES 1 through 50, inclusive, and each of them, Defendants. Case No. 30-2015-00795246-CU-BC-CIC Honorable Martha K. Gooding Department C34 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT RESERVATION NO. 72275513 Date: February 29, 2016 Time: 1:30 p.m. Dept... C34 First Amended Complaint Filed: 10/26/15 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES L INTRODUCTION Plaintiff’s claims are a moving target. Initially, Plaintiff alleged that Defendants breached the parties’ written agreement by failing to issue Plaintiff 750,000 shares of Company stock as obligated. But when Defendants pointed out this claim was inconsistent with Plaintiff's other allegations, Plaintiff reversed course admitting that the Company did issue 750,000 shares of Company stock to him but that the shares were “fraudulent” because there is a discrepancy in the transfer date. And when this Court ruled that Plaintiff’s compensation claims could not support a cause of action for fraud, Plaintiff amended his complaint alleging that Defendants engaged in mismanagement and misappropriated Company stock. Compounding matters, Plaintiff argues whatever facts support his ever changing theories of liability, regardless of whether they are pleaded or whether they are contradicted by his prior judicial admissions. For example, Plaintiff alleges that he began his relationship with the Company in September 2012 (First Amended Complaint (“FAC”), fn. 2), but asserts in his Opposition he is a “cofounder” of the Company, which was formed in early 2011. Similarly, in his original complaint, Plaintiff alleged that the Parties” Consulting Agreement was intended to memorialize in writing all of the Company’s prior oral agreements (Original Complaint, § 9); but when those allegations proved detrimental to his breach of oral contract claim, he reversed course asserting that the actual purpose of the Consulting Agreement was to “reclassify plaintiff as an independent contractor.” FAC, § 12. And when his allegations that the Director Defendants were at all times acting in their corporate capacities proved problematic, he revised his position and alleged that they were acting in both their individual and corporate capacities. Equally troublesome, when the law does not support Plaintiff's ever evolving claims, he simply ignores it. In his Opposition, Plaintiff tangentially addresses only one of the several controlling cases cited by Defendants in the Demurrer. Plaintiff's revisionist efforts and evasive tactics aside, as demonstrated in the moving papers and as further discussed below, Defendants’ Demurrer to the FAC should be sustained without leave to amend because: . Plaintiff's breach of oral contract claim fails because the alleged oral agreement is 1 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT © O 0 0 NN O N wn bs e W N N O N N N N N N N N m s e e e a e e e e e e 0 ~ ~ S N W n DN W N = o 0 N N N n n R R W N Oo not sufficiently definite - no set number of shares was agreed upon, no benchmarks for share distribution were set, no term of involvement by Plaintiff was agreed upon, and no adjustments for future investors, increased assistance by others or reduced assistance by Plaintiff was contemplated. Even if Plaintiff could allege an oral agreement, it was superseded by a fully integrated Consulting Agreement. And to the extent that Plaintiff now contends he anticipated future similar agreements, it is well settled law that a mere agreement to agree is not enforceable. o Plaintiff’s Opposition similarly fails to rehabilitate his breach of written contract claim because Plaintiff admits that the Company performed its obligations under the Consulting Agreement, by issuing 750,000 shares of Company stock to Plaintiff as required. In fact, Plaintiff attaches to the FAC a copy of both the stock transfer certificate and the Company’s Capitalization Sheet confirming the same. . Plaintiff's fraud claims remain deficient. Plaintiff’s contract based fraud claims (i.e. Defendants promised that I would be compensated like an equal partner) still add up to nothing more than a claim for non-performance and his “fraudulent transfer document” claims are similarly insufficient because Plaintiff concedes he did not learn about these documents until April 2015 (when he left the Company) and therefore cannot establish reliance. The claims also fail because they do not meet the heightened standard of specificity for pleading such claims. ° Plaintiffs breach of fiduciary duty and constructive fraud claims fail because Plaintiff does not and cannot plead facts establishing the existence of a fiduciary relationship between Plaintiff and Defendants relative to Plaintiffs contract based claims. And Plaintiff lacks standing to assert a claim based on director mismanagement or misappropriation of Company assets because those claims belong to the Company, not Plaintiff. ° Plaintiff's quantum meruit claim fails because there can be no implied promise to pay the reasonable value for services when, as here, there is an express agreement to pay a fixed sum. Moreover, Plaintiff was compensated for his services in line with the Consulting Agreement. e Plaintiff's claims are especially unsustainable as to the Director Defendants because Plaintiff alleges no facts supporting their individual liability. Plaintiff concedes that his 2 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT c o 3 o N wn R W Oo 10 11 12 13 14 15 16 17 18 19 20 21 9% 23 24 25 26 27 28 contract based claims against the Director Defendants fail because he cannot allege that any of the Director Defendants entered the alleged oral or written contracts in their individual capacities. Plaintiff similarly cannot assert a single viable tort claim against any of the Defendants; and while Plaintiff contends that his conclusory, factually unsupported alter ego allegations are sufficient, the law is not in accord. IL. LEGAL ARGUMENT A. Plaintiff's Breach of Oral Contract Claim Fails As It Is Not Sufficiently Definite. Cee Plaintiff does not dispute that the pleading of an oral contract must be “‘sufficiently definite . . . for the court to ascertain the parties’ obligations and to determine whether those obligations have been performed or breached.” Bustamante v. Intuit, Inc., 141 Cal. App.4th 199, 209 (2006) (finding oral agreement which left open key terms such as form and amount of plaintiff’s compensation; the extent, duration, and nature of his management role, if any; the amount of defendant’s royalty; and the equity percentage held by the parties was too uncertain to be enforceable). Nor does he dispute that a promise, to be enforceable, must be definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages. Ladas v. California State Auto. Assn, 19 Cal.App.4th 761, 770 (1993). Instead, ignoring these relevant authorities, Plaintiff cites to Sterling v. Taylor, 40 Cal.4th 757 (2007) for the unremarkable proposition that “contractual precision, although desirable, is not required.” Opposition pg. 8. Although Defendants do not contend contractual precision is required, Sterling is instructive. There plaintiff sought to introduce parol evidence to circumvent the statute of frauds but plaintiff's efforts were rejected because the court determined that the extrinsic evidence offered by plaintiffs was at odds with the written contract, rendering the parties’ agreement too uncertain to be enforceable. Plaintiff’s reliance on Okun v. Morton, 203 Cal. App.3d 805 (1988) is equally unavailing. In Okun, the court merely found that the parties’ written agreement regarding the exploitation of future ventures was not too uncertain to be enforceable because the agreement specified the parties’ respective investment proportions, and the ratio for the payment of additional expenses. Id. at 817-818. 3 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT A W N © 0 9 O N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Significantly, Plaintiff does not argue that the alleged contract terms are sufficiently definite. He simply argues that since he worked at the Company before the Consultation Agreement was executed and after it expired, the parties “must have” entered some sort of oral agreement concerning his compensation. Opposition pg. 8. Courts will not imply the essential terms omitted from an oral agreement, and Plaintiff’s assertion that the parties agreed to enter future agreements regarding compensation will not save his claim as this merely demonstrates that at best, the Parties had an agreement to agree, which is similarly unenforceable under California law. Cal. Lettuce Growers v. Union Sugar Co., 45 Cal.2d 474, 481 (1955). None of the essential elements of the Parties’ purported oral agreement are alleged with certainty. Plaintiff concedes that the Parties never agreed on the number of shares to be issued to Plaintiff, that no benchmarks for share distribution were set, no minimum term of involvement by Plaintiff was agreed upon, and no adjustments for future investors, increased assistance by others or reduced assistance by Plaintiff was contemplated. Since enforcement of an oral agreement is predicated on a meeting of the minds regarding all essential contract terms (Bustamante v. Intuit, Inc., 141 Cal.App.4th 199, 208(2006)) and Plaintiff has failed to allege sufficient facts to establish the same, despite several opportunities to do so, Defendants’ demurrer to the first cause of action for breach of oral contract should be sustained. B. Plaintiff’s Breach of Written Contract Claim Fails. Plaintiff alleges Defendants breached the Consulting Agreement because they “failed to give Plaintiff the quantity of shares [750,000] they had promised” per the terms of the Consulting Agreement (FAC 38). As detailed in the moving papers, and unrefuted in Plaintiff's Opposition, Plaintiff admits that Defendants did transfer 750,000 shares of Company stock to him. FAC 925. In fact, Exhibits C and D to the FAC attach the stock transfer certificate, and the Company’s Capitalization Sheet confirming that the shares were in fact transferred. Despite this fatal concession, Plaintiff asserts that although the 750,000 shares of Company stock were issued to him, stock certificates were not delivered to him until April 2015. Opposition pg. 11. Of course, Plaintiff does not allege, and the Consulting Agreement does not require, delivery of stock certificates to Plaintiff by a date certain. See e.g., FAC, Ex. A. In fact, 4 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT © °° 3 O N nn BR WL N O N RN N N N N N m m e m s a e e e e e a e d 0 ~~ O O Wn RA W N = O 0 X n h Ww W Nd s O Plaintiff does not even allege that he requested the Company deliver the stock certificates to him. However, even if he did, the undeniable fact is that the Company did comply with its obligations under the Consulting Agreement by issuing and thereafter delivering 750,000 shares of Company stock to Plaintiff weeks before this litigation was instituted. Accordingly, Plaintiff’s breach of contract claim fails as a matter of law. In an effort to avoid this inevitable conclusion, Plaintiff alleges that a discrepancy in the stock certificates “might” expose the Company to statutory damages under Corporation Code sections 2201 and 2202. This argument is a red herring. Even if Plaintiff did allege facts demonstrating that the Company violated these code sections (which he did not and cannot) Plaintiff is not suing for statutory penalties. Moreover, the cited code sections (which provide for statutory penalties for failure to maintain corporate records or provide shares after written | request) are irrelevant to Plaintiffs breach of contract claim, which merely alleges that Defendants failed to comply with their obligation to issue 750,000 shares of Company stock to Plaintiff, Plaintiff admits that the Company issued 750,000 shares of stock in accordance with the Consulting Agreement, and his breach of written contract claim accordingly fails. C. Plaintiff Has Not Alleged Sufficient Facts To Support the Misrepresentation Claims. Plaintiff alleges two distinct theories to support his purported fraud claim: (1) Defendants allegedly promised to compensate Plaintiff for his services to the Company; and (2) Defendants fabricated stock transfer documents “to make it appear as if Plaintiff had been given the shares he was promised.” FAC 57, 67. Plaintiff fails to allege facts sufficient to support either. As previously determined by this Court, Plaintiff's assertion that Defendants purportedly promised to make Plaintiff an “equal partner” in the Company fails because it is nothing more than a claim for non-performance which cannot support a fraud claim. See e.g. RIN, Ex. A: 9/28/15 Order on Demurrer to Complaint; see also Tenzer v. Superscope, Inc., 39 Cal.3d 18, 30 (1985) (mere fact that a defendant does not perform a promise does not establish that he or she never intended to do so); Neu-Visions Sports, Inc. v. Sorena/McAdam /Bartells, 86 Cal. App.4th 303, 310-11 (2000) (“It is hornbook law that an actionable misrepresentation must be made about past or existing facts; statements regarding future events are merely deemed opinions.”) 5 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT A W N OO 0 NN O Y Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff’s FAC and Opposition do nothing to alter the Court’s prior determination that Plaintiff's compensation based fraud claim is legally insufficient, by merely reiterating that he continued to work for the Company based on Defendants’ purported misrepresentation and subsequent affirmations he would receive an equal interest in the Company as one of its co-founders. Because Plaintiff has done nothing to rehabilitate his insufficient compensation based fraud claim, Defendants’ demurrer should be sustained. Plaintiffs “stock fabrication” claim similarly fails because Plaintiff concedes that he did not learn about the alleged “fabricated stock transfer documents and other such documents” until at least April 2015, which is when his relationship with the Company ended. RIN, Ex. B: Complaint § 21; FAC § 25-26; FAC, § 31. Plaintiff admits to this belated discovery but argues without analysis that reliance is established because Defendants made prior unarticulated misrepresentations regarding Plaintiff’s compensation. Even assuming arguendo that Plaintiff alleged such misrepresentations beyond just non-performance, and he has not, Plaintiff has not explained how prior representations regarding compensation justify reliance on stock transfer documents discovered at the end of his relationship with the Company or how such reliance resulted in damage. The demurrers to Plaintiff's fourth and fifth causes of action for intentional and negligent misrepresentation should accordingly be sustained without leave to amend. D. Plaintiffs Constructive Fraud and Breach of Fiduciary Duty Claims Fail. In support of his constructive fraud and breach of fiduciary duty claims, Plaintiff cites Jones v. HF. Ahmanson & Co., 1 Cal.3d 93 (1969) for the proposition that majority shareholders owe a fiduciary responsibility to the minority and to the corporation. Plaintiff’s reliance upon Jones, which has received substantial negative treatment, is misplaced. First, Plaintiff has not alleged that Defendants are majority shareholders in the Company or that Plaintiff is a minority shareholder. See generally FAC; McCormick v. Fund American Companies, Inc.; 26 F.3d 869, (9th Cir. 1994) (affirming dismissal of breach of fiduciary duty claims under California law where no controlling shareholder was alleged). Plaintiff also inconsistently claims that the Company shares issued to him are “invalid,” which, if true, would mean that Plaintiff is not a shareholder. Shareholder status aside, as previously determined by this Court, Plaintiff's claims 6 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT © © NN A N nn BA W N N O N D N N N N N N N m e m e m e s e a e m e e e e e e 0 ~ N O A WL» A W N = O YW E N N B W Nd OO for compensation (which are not based on his status as a shareholder, but rather on his status as an independent contractor) implicate no fiduciary or confidential relationship, and therefore cannot support these claims. See Speirs v. Bluefire Ethanol Fuels, Inc., 243 Cal. App. 4th 969, 982-83 (2015) (affirming nonsuit as to plaintiff minority shareholders’ breach of fiduciary duty claims and confirming that Jones does not provide support for such a claim, where the claims pertain to “their contract rights as warrant holders, not to alleged malfeasance against plaintiffs’ interests as common stock shareholders.”). As in Speirs, Plaintiff's claims pertain to his compensation and have nothing to do with his status as a shareholder. See Patriot Scientific Corp. v. Korodi, 504 F. Supp. 2d 952, 966 (S.D. Cal. 2007) (find that “as a matter of law, defendants and [plaintiff], as employer and independent contractor, did not have a fiduciary relationship”); Wiltsee v. California Emp. Com., 69 Cal.App.2d 120, 125, 128 (1945) (employment contract entitling employee to 25% of future profits does not give rise to a fiduciary relationship). Plaintiff's “mismanagement” claims are similarly insufficient because, as detailed in the moving papers, Plaintiff lacks standing to assert such claims because they belong to the Company. Avikian v. WTC Financial Corp., 98 Cal. App.4th 1108, 1114 (2002) (affirming dismissal of plaintiff's claims for lack of standing because the “core” of plaintiff’s claim was that the defendants mismanaged the company and the alleged loss of stock value was “merely incidental to the alleged harm inflicted upon [the Company] and all its shareholders”); Schuster v. Gardner, 127 Cal. App.4th 305, 312-313 (2005) (affirming order sustaining demurrers without leave to amend based on shareholder action against officers and directors of corporation for mismanagement because claims belonged to the company, not the individual shareholder). Ignoring these authorities, Plaintiff contends that mismanagement claims can be asserted both directly and derivatively. Opposition pg. 14. Plaintiff’s reliance on Jones for this erroneous proposition is also misplaced. In Jones, minority shareholders sued majority shareholders after the majority shareholders (allegedly at the expense of the minority shareholders) contributed their shares to a new corporation in exchange for stock and thereafter sold a portion of their shares in the new corporation for a considerable profit. The Jones court held that minority shareholders could bring a direct action because there was no claim of damage to the original corporate entity, 7 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT OO 0 N N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and plaintiffs could not bring derivative claims because they were not shareholders of the new entity. Jd. at 107. Plaintiff alleges no similar facts and instead contends that Defendants engaged in acts of mismanagement by authorizing “fraudulent” stock certificates, damaging the Company and subjecting it to potential penalties. Opposition pp. 14. Where, as here, the gravamen of the complaint is that the corporation’s officers or directors were guilty of “misfeasance or negligence in managing the corporation’s business . . . any obligations so violated were duties owed directly and immediately to the corporation,” and any action brought by an individual stockholder to recover for such damages is derivative. Nelson v. Anderson, 72 Cal. App.4th 111, 124-126 (1999); Sax v. World Wide Press, Inc., 809 F.2d 610, 614-15 (9th Cir. 1987) (rejecting plaintiffs reliance upon Jowes to assert a direct claim where damages for loss of income to plaintiff’s stock “were incidental to injuries to” the company). E. Plaintiff’s Promissory Estoppel Claim Is Insufficient. As detailed in the moving papers, and entirely ignored by Plaintiff in his Opposition, Plaintiff's promissory estoppel claim fails because Plaintiff did not allege a promise in clear and unambiguous terms that is sufficiently definite to determine the duty and the limits of performance by the parties. Ladas v. California State Auto. Assn., 19 Cal.App.4th 761, 770 (1993); National Dollar Stores, Ltd. V. Wagnon, 97 Cal. App.2d 915, 919-920 (1950) (to state a claim for promissory estoppel plaintiff must allege a promise clear and unambiguous in its terms). In addition, “[p]romissory estoppel is ‘a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.” Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority, 23 Cal.4th 305, 310 (2003). In other words, the doctrine serves as a substitute for consideration, and promissory estoppel is not appropriate when consideration for a promise has been alleged. Youngman v. Nevada Irr. Dist., 70 Cal.2d 240, 250 (1969). Plaintiff undeniably received consideration for his alleged services. FAC, Ex. C (showing transfer of 825,000 shares to Plaintiff); Ex. D (stock certificate for 750,000 shares); RIN, Ex. B: Complaint 16 (“the Board of Directors unilaterally granted 75,000 additional shares of Company stock to Plaintiff”). Plaintiff's promissory estoppel claim is therefore insufficient. 8 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT Oo 0 N N un Bb 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 F. Plaintiff Alleges No Colorable Claim Against the Director Defendants. 1. The Direct Claims Fail. Plaintiff does not dispute that officers and directors of corporate entities are not personally liable for contracts they enter on behalf of the corporation unless they purport to bind themselves individually. The alleged agreements are between Plaintiff and the Company, and concern work Plaintiff was to perform for the Company in exchange for stock. Plaintiff effectively concedes that his contract based claims are improper relative to the Director Defendants, ignoring the extensive authority cited in the demurrer. Accordingly, the Director Defendants’ demurrer to Plaintiff’s first, second, third and eighth causes of action for breach of oral and written contract, quantum meruit and promissory estoppel must be sustained without leave to amend. Similarly, as established above, Plaintiff cannot state a valid tort claim against any of the Defendants. Leaving aside that failure, other than the general conclusory allegations summarily asserted against all Director Defendants, there are no specific allegations concerning any misconduct by Tyler Rubin, John Changala or Tom Rolfes. In fact, there are no allegations that Plaintiff ever had any direct contact with these individuals. See Balsam v. Trancos, Inc., 203 Cal.App.4th 1083, 1109-1111 (2012) (cited by Plaintiff and affirming judgment for defendant chief executive officer because he did not participate in the unlawful acts). And the allegations |against Alon Raphael and Brian Larzelere are by themselves insufficient. 2. The Alter Ego Allegations are Inconsistent and Insufficient. Recognizing the deficiencies in its claims against the Director Defendants, Plaintiff seeks to save his claims by asserting that Director Defendants are alter egos of the Company. As detailed in the moving papers (and completely ignored by Plaintiff’s Opposition) conclusory allegations of “alter ego status” are insufficient. Rather, a plaintiff must specifically allege facts demonstrating: “(1) the individual sought to be charged must not only be the sole owner and manager of the corporation, but there must be such ‘a unity of interest and ownership that the individuality, or separateness, of the said person and corporation has ceased’; and (2) the facts must be such that to deny individual liability would ‘sanction a fraud or promote injustice.’” Design Associates, Inc. v. Welch, 224 Cal. App.2d 165, 170-171 (1964). Thus, in Norins Realty 9 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT A O W N © «0 3 O N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 Co. v. Consolidated A. & T. G. Co., 80 Cal.App.2d 879 (1947), the court found that the allegations of the complaint are not sufficient to support a judgment against the individual defendants as alter egos of a corporate entity because the individuals were “not parties to the agreements, they have not guaranteed performance on the part of [the Company]” and there was no allegation that the corporation was presently or prospectively insolvent. Id. at pg. 882-83. Ignoring these relevant authorities and failing to cite any authority of his own, Plaintiff’s argument is limited to the erroneous contention that the language quoted above and in the moving papers (which is a direct quote from Design Associates, Inc. v. Welch) is not supported by any case law. Even a cursory review of the cited authorities establishes that Plaintiff’s assertion is incorrect and nothing more than a transparent effort to deflect this Court’s attention from the salient issues. Since conclusory allegations of alter ego are insufficient and Plaintiff's own allegations establish 1) that FemtoMetrix held regular board meetings; 2) it made decisions as a board of directors rather than through one controlling owner or shareholder; 3) the board of directors required that all agreements be reduced to writing; and 4) FemtoMetrix has multiple shareholders (including Plaintiff) who are not members of the Board (Demurrer pg. 6), Plaintiff’s conclusory alter allegations cannot save his defective claims. Moreover, as recounted in the demurrer, the allegations are internally inconsistent because they are not specific to the Director Defendants, but more generally contend that “there is a unity of interest between Femtometrix and its “shareholders,” of which the Plaintiff is one. FAC 4. The Director Defendants’ demurrers to each of Plaintiff's claims should be sustained without leave to amend. III. CONCLUSION Based on the foregoing, Defendants respectfully request this Court sustain the demurrer to the FAC, and every cause of action stated therein, without leave to amend. Dated: February 22,2016 "Ne & WHITNEY LLP By Mh Fajgal M. Zubairi Lynnda McGlinn Attorney for Defendants 10 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT OO © NN S N nn bk W N N O N N RN N N N N N e m e t e e e m e e Ww N O Wn RA W N = O YO N N N E W ND Oo PROOF OF SERVICE STATE OF CALIF ORNIA, COUNTY OF ORANGE I am employed in the City of Costa Mesa, County of Orange, State of California. I am over the age of 18 years and not a party to the within action. My business address is 600 Anton Boulevard, Suite 2000, Costa Mesa, CA 92626. On February 22, 2016, I served the document(s) named below on the parties in this action as follows: DOCUMENT(S) DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO SERVED: PLAINTIFF'S FIRST AMENDED COMPLAINT SERVED UPON: Aren Derbarseghian Attorney at Law 18341 Sherman Way, Suite 201B Reseda, CA 91335 ad@ad-esq.com Telephone: (818) 746-0005 / Facsimile: (818) 668-3212 Attorneys for Plaintiff ] (BY MAIL) I caused each such envelope, with postage thereon fully prepaid, to be placed in the United States mail at Costa Mesa, California. Iam readily familiar with the practice of Dorsey & Whitney LLP for collection and processing of correspondence for mailing, said practice being that in the ordinary course of business, mail is deposited in the United States Postal Service the same day as it is placed for collection. X (BY FEDERAL EXPRESS) I am readily familiar with the practice of Dorsey & Whitney LLP for collection and processing of correspondence for overnight delivery and know that the document(s) described herein will be deposited in a box or other facility regularly maintained by Federal Express for overnight delivery. ] (BY ELECTRONIC SERVICE VIA FILE & SERVE XPRESS) I attached a true and correct copy of the above-entitled document(s) to LexisNexis File & ServeXpress by electronic transfer for service on all counsel of record by electronic service pursuant to the Order Authorizing Electronic Service. ] (BY FACSIMILE) The above-referenced document was transmitted by facsimile transmission and the transmission was reported as complete and without error. Pursuant to C.R.C. 2009(i), I caused the transmitting facsimile machine to issue properly a transmission report, a copy of which is attached to this Declaration. x (STATE) I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on February 22, 2016, at Costa Mesa, California. Ke st ts eft nsd Sandra Dickerson 1 PROOF OF SERVICE