Sean Ryan vs. Ry-Co, LLC

Reply Other

Cal. Super. - 4th Dist.September 15, 2017

~N O N nw Bb 10 11 12 13 14 15 16 17 18 19 20 21 23 23 24 25 26 27 28 KERMIT D. MARSH (SBN 150745) JING TSANG (SBN 296427) THE LAW OFFICES OF KERMIT D. MARSH ELECTRONICALLY FILED 9550 Warner Avenue, Suite 250 Re fe oT Bar i Fountain Valley, California 92708 Tol (714) 593.3321 02/22/2018 at 11:36:00 A Fax (888) 396-6272 Clerk of the Superior Court By & Clerk, Deputy Clerk Attorneys for Defendants CHARLES TYLER and TYLER LIGHTING SERVICES, INC. SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER SEAN RYAN, an individual, Case No: 30-2017-00944024-CU-CO-CJC Plaintiff, Assigned for All Purposes to the Honorable Melissa R. McCormick VS. RY-CO, LLC, a California limited liability DEFENDANTS CHARLES TYLER AND company; CHARLES TYLER, an TYLER LIGHTING SERVICES, INC.’S individual; TYLER LIGHTING REPLY IN SUPPORT OF DEMURRER TO SERVICES, INC., a California corporation; | PLAINTIFF’S FIRST AMENDED and DOES 1 through 10, inclusive, COMPLAINT Defendants. Date: March 1, 2018 Time: 1:30 p.m. Dept: ls Date Filed: ~~ September 15, 2017 Court Reservation No.: 72698712 Defendants Charles Tyler (“Mr. Tyler”) and Tyler Lighting Services, Inc. (“Tyler Lighting”) (collectively, Mr. Tyler and Tyler Lighting will be referred to as the “Tyler Parties”) hereby respectfully submit this Memorandum of Points and Authorities in Reply to the Opposition filed by Plaintiff Sean Ryan (“Plaintiff”) to Tyler Parties’ Demurrer to Plaintiff’s 1 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT A W N S OO XX 9 A N Wn 1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 First Amended Complaint. Because Plaintiff's Opposition fails to resolve the failings of the First Amended Complaint, the Demurrer should be sustained. I. ARGUMENT A. The First Cause of Action for Dissolution Fails to State a Cause of Action. As set forth in the Demurrer, Plaintiff misrepresents the terms of the Operating Agreement in the First Amended Complaint. Plaintiff states: “Paragraph 14.14 of the Operating Agreement does not permit a partition [SIC] a legal action for partition of the assets and each member has waived such right. Therefore, plaintiff RYAN is required to seek a dissolution of RY-CO.” (First Amended Complaint, paragraph 24.) Contrary to Plaintiff's false representation, that is not what the Operating Agreement says. The relevant portion of the Operating Agreement, paragraph 10.9, expressly states, in full: “NO ACTION FOR DISSOLUTION. The Members acknowledge that irreparable damage will be done to the goodwill and reputation of the Company if any Member should bring an action in Court to dissolve the Company under circumstances where dissolution is not required by Section 10.1 hereof. This Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Economic Interests. Accordingly, except where the Manager has failed to liquidate the Company as required by ARTICLE 10, each Member hereby waives and renounces its right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution pursuant to Section 17351 of the Act on the ground that (i) it is not reasonably practicable to carry on the business of the Company in conformity with the Articles or this Agreement, or (ii) dissolution is reasonably necessary for the protection of the rights or interests of the complaining Member. Damages for breach of this Section 10.9 may be offset against Distributions by the Company to which such Member would otherwise be entitled.” The express prohibition on dissolution actions is not a mere restriction on “partition,” and Plaintiff's mischaracterization is particularly troubling, as it was Plaintiff's former counsel who drafted the Operating Agreement. 2 " DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT O O © 9 O N n n bs 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 28 26 27 28 I'he First Amended Coiptaint offers two reasons for dissolution: (1) “to protect the rights and interests of Plaintiff” (First Amended Complaint, paragraph 28), and (2) “it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement” (First Ainended Complaint, paragraph 29). Those are the very same grounds expressly waived in the penultimate sentence of Section 10.9 of the Operating Agreement. Although the Operating Agreement does allow a dissolution action under other circumstances, it expressly prohibits a dissolution action based on either of the two grounds set forth in the First Amended Complaint. Consequently, the first cause of action for dissolution must fail. Plaintiff’s mistaken reliance on Corporations Code, Section 17701.10 does not change this result. Contrary to Plaintiff's false claim that Section 17701.10 “does not permit members of a limited liability company to waive their right to seek judicial dissolution” (Opposition, 5:2), Section 17701.10 only provides that the parties may not alter the Court’s power to decree dissolution “in the circumstances specified in subdivision (a) of Section 17707.03 or the provisions for avoidance of dissolution in subdivision (¢) of Section 17707.03.” In all other --- the parties may waive the right to bring an action for dissolution. Further, Section 17701.10 does not prevent the parties from imposing requirements that must be satisfied before a member may seek dissolution. The Operating Agreement expressly provides that a member must first engage the buy-out process. Plaintiff does not even allege that it has satisfied this requirement of the Operating Agreement. The buy-out process allows the disgruntled member to leave the limited liability company without destroying the business for the other members who wish to continue with the business. The buy-out process in the Operating Agreement is consistent with Section 17701.10, as Judicial dissolution becomes available after a party is unsuccessful in obtaining a buy-out after complying with the buy-out process. Tellingly, Plaintiff does not even allege that it ever complied with, or even attempted, the buy-out process. Plaintiff cannot in opposition to a Demurrer assert that it satisfied a provision of the Operating Agreement when Plaintiff failed to 3 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT © NN AN wn BA S O 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 allege that as a fact in its First Amended Complaint. An opposition to a demurrer is not an amendment of a complaint. For the above reasons, the Demurrer to Plaintiff’s First Cause of Action for Dissolution should be sustained. B. The Third Cause of Action for Breach of Contract Fails to State a Cause of Action. It is undisputed that an essential element for a cause of action for breach of contract is that the Plaintiff has fully satisfied all of its obligations under the contract. Civil Code, Section 1439; McNulty v. New Richmond Land Co. (1919) 44 Cal. App. 744, 747. By filing a dissolution action without first satisfying the conditions set forth in the Operating Agreement, or even alleging in its First Amended Complaint that it had done so, Plaintiff has failed to fully satisfy all of its obligations under the contract. Consequently, the cause of action for breach of contract must fail. Plaintiff states in its Opposition that “One must be able to file a lawsuit to enforce his or her rights.” (Opposition, 7:5-6.) That statement is demonstrably false. California recognizes a variety of enforceable alternatives to filing a lawsuit, including arbitration, initial meet and confer requirements, mediation, etc. The parties are free to impose such requirements as a prerequisite to litigation, and Plaintiff’s failure to comply with those requirements in the Operating Agreement is fatal to a breach of contract cause of action. C. Plaintiff Admits That Its First Amended Complaint Is Deficient and Asks to File a Second Amended Complaint. In its Opposition, Plaintiff requests leave to amend to add the following allegation: “Ryan has performed all the conditions, covenants, and promises required to be performed on his part in accordance with the terms of the Operating Agreement.” (Opposition, 7: 10-12) This is an admission that this essential element of full compliance with the contract is missing from the First Amended Complaint. This is an additional reason why the demurrer should be sustained. D. The Tyler Parties Do Not Allege Any Uncertainty in the Operating Agreement. Plaintiff attempts to create a strawman to knock down in its Opposition. Plaintiff represents that the Tyler Parties’ “argument is not that the pleading is uncertain but that the 4 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT wo NN OQ 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 235 26 27 28 Operating Agreement is uncertain.” Plaintiff cites no reference to support that false statement. Nowhere does the Demurrer allege that the Operating Agreement is uncertain. It is the Tyler Parties who are attempting to enforce the terms of the Operating Agreement, and it is Plaintiff who is attempting to argue that terms of the Operating Agreement are unenforceable, despite the drafting of the Operating Agreement by Plaintiff's own prior counsel. As the Demurrer expressly states, it is the First Amended Complaint which is vague, uncertain and ambiguous, Bis to Plaintiff’s mischaracterization of the terms of the Operating Agreement in the First Amended Complaint. E. The Tyler Parties Complied with the Meet and Confer Requirement. Although a Demurrer is directed to the allegations of a complaint, Plaintiff seeks to engage in a duel of declarations regarding the meet and confer effort. That is not appropriate. Plaintiff contends that the declaration must go over each point in dispute that was discussed during the meet and confer effort. That is not the law. Code of Civil Procedure, Section 430.41(a) requires that the party filing the demurrer attempt to meet and confer with other party to attempt to resolve issues. The demurring party must file a declaration stating either of the following: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer. (B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” Code of Civil Procedure, Section 430.41(a)(3). The declaration of compliance by counsel for the Tyler Parties satisfies these requirements. It specifies that the meet and confer efforts were conducted by means of multiple telephone calls. It further specifies that the parties were not able to reach an agreement on all issues in dispute. Thus, the declaration of compliance satisfies the requirements of Section 430.41. Plaintiff complains that the declaration should provide a detailed description of each issue addressed. That is not required by Section 430.41. If Plaintiff believes that should be a 5 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT S Oo 0 N N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 requirement, Plaintiff has the right to bring such a proposal to the Legislature. F. Plaintiff’s Request for Attorneys’ Fees Is Improper. In order to obtain an award of attorneys’ fees pursuant to Code of Civil Procedure, Section 128.5, there are procedural requirements, including the filing of a separate motion for sanctions. Code of Civil Procedure, Section 128.5(f)(1)(A). Plaintiff has made no attempt to meet those requirements. Plaintiff’s request for attorneys” fees appears to be an afterthought tossed in at the close of Plaintiff’s Opposition. The request is without merit and procedurally improper. II. CONCLUSION For the above reasons, Defendants Charles Tyler and Tyler Lighting Services, Inc. respectfully request that this Honorable Court sustain the Demurrer without leave to amend, or, in the alternative, with leave to amend. Respectfully submitted. DATED: February 22,2018 LAW OFFICES OF KERMIT D. MARSH Lond BM KERMIT D. MARSH Attorneys for Defendants, CHARLES TYLER and TYLER LIGHTING SERVICES, INC. 6 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT SN ~N O N W n 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 PROOF OF SERVICE I declare that I am over the age of eighteen (18) and not a party to this action. My business address is 9550 Warner Avenue, Suite 250, Fountain Valley, CA 92708. On February 22, 2018, I served the following document(s): DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT on the interested parties in this action by placing a true and correct copy of such document, enclosed in a sealed envelope, addressed as follows: Gino D. Serpe, Esq. Law Office of Gino D. Serpe 600 West Broadway, Suite 700 San Diego. CA 92101 Chad D. Morgan, Esq. The Law Office of Chad D. Morgan 1101 California Avenue, Suite 100 Corona, CA 92881 () I am readily familiar with the business’ practice for collection and processing of correspondence for mailing with the United States Postal Service. I know that the correspondence was deposited with the United States Postal Service on the same day this declaration was executed in the ordinary course of business. I know that the envelope was sealed and, with postage thereon fully prepaid, placed for collection and mailing on this date in the United States mail at Fountain Valley, California. (xx) By overnight courier, I caused the above-referenced document(s) to be deposited in a box or other facility regularly maintained by the overnight courier, or I delivered the above-referenced document(s) to an overnight courier service, for delivery to the above addressee(s). Executed on February 22, 2018, at Fountain Valley, California. (xx) (State) ~ Ideclare under penalty of perjury under the laws of the State of California that the above is true and correct. () (Federal) I declare that I am emploved in the office of a member of the bar of this court at whose direction the service was made. (JT 7 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT