Reply_in_support_of_demurrer_to_sacReplyCal. Super. - 4th Dist.October 25, 20171 || Joshua M. Wolff (134426) James P. Mascaro (209773) 2 || WOLFF MASCARO LLP 9160 Irvine Center Dr., Suite 200 ELECTRONICALLY FILED 3 | | Irvine, California 92618-4683 Superior Court of California, T: 949-769-3600 | F: 949-769-3601 County of Orange 4 jwolff@wolffmascaro.com 10/05/2018 at 05:54:00 PM jmascaro@wolffmascaro.com Clerk of the Superior Court 3 By & Clerk, Deputy Clerk 6 | | Attorneys for Defendants 7 8 SUPERIOR COURT OF CALIFORNIA 9 COUNTY OF ORANGE, CENTRAL JUSTICE CENTER 10 | | ROGER FELDMAN, an individual, Case No. 30-2017-00951741-CU-BC-CJC Hon. Ronald L. Bauer; Dept. CX103 11 Plaintiff, 12 V. RELY IN SUPPORT OF DEMURRER TO SECOND AMENDED COMPLAINT 13 | | GEARSHIFT INC., a California corporation; THOMAS BLINN, an individual; NEVIN 14 || SAFYURTLU, an individual; ERIC Date : October 15,2018 CWIERTNY, an individual; NORM TRIBE, Time : 9:00 a.m. 15 || an individual; and DOES 1 through 100, Dept. : CX103 inclusive, 16 Filed : October 25,2017 Defendants. Trial : TBD 17 18 || IL. INTRODUCTION 19 In his Opposition to Defendants Thomas Blinn, Nevin Safyurtlu, Eric Cwiertny, and Norm 20 | | Tribe’s (“Individual Defendants”) Demurrer to the Second Amended Complaint (“SAC”), 21 | | Plaintiff Roger Feldman struggles mightily to distract the Court from the basic and unavoidable 22 | | fact that the Individual Defendants are parties to the Shareholder Agreement and therefore, as a 23 | | matter of law, cannot be held liable in tort for interfering with it. None of Feldman’s arguments 24 | | suggesting some kind of exception to this rule has any legal support. 25 First, Feldman argues that the Individual Defendants are “not parties to the part of the 26 | | Amended Shareholder Agreement at issue.” (Opp., p. 2:4-5 (emphasis added)) He cites no legal 27 | | authority—and the Individual Defendants have been unable to find any—suggesting that the 28 | | California Supreme Court’s admonition in Allied Equipment Corp. v. Litton Saudi Arabia Ltd. Wolff Mascaro LLP -1- 9160 Irvine Center Dr. [Sean Reply in Support of Demurrer to Second Amended Complaint 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Wolff Mascaro LLP 9160 Irvine Center Dr. Suite 200 Irvine, CA 92618 (1994) 7 Cal.4™ 503 that “the tort cause of action for interference with a contract does not lie against a party to the contract” (id. at 514) has ever been interpreted as creating the exception Feldman claims. There is no such exception. The Individual Defendants are parties to the Shareholder Agreement, which is attached to and incorporated into the SAC. Consequently, as a matter of law, Feldman cannot state a claim against them for inducing breach of the Shareholder Agreement, and amendment would be futile. Second, Feldman’s argument that “owners or officers of a business entity can be held liable for interfering with that entity’s contracts” (id., p. 4:22-23) similarly tries to bypass the fact that the Individual Defendants are parties to the Shareholder Agreement. The cases he cites in support of his argument all concern owners or officers who are not parties to the agreement at issue. In fact, all of these cases proceed from the clear and unequivocal rule that parties to an agreement cannot, under any circumstances, be held liable in tort for interfering with it. They concern only whether immunity from tort liability can be broadened to encompass nonparties who are also owners or officers of the contracting entity, and therefore provide no support for Feldman’s position. Finally, Feldman’s attempt to turn this into a case of pleading in the alternative fails to note that pleading in the alternative is not a mechanism for reviving claims that are legally barred. It is used when the plaintiff is unaware of key facts and so must plead inconsistent facts until discovery. This is far from the case here, where Feldman himself is a party to the Shareholder Agreement, is well aware that the Individual Defendants are also parties to the Agreement, and was present for and involved in the drafting of the Agreement. Feldman has as much knowledge about the Individual Defendants’ status as parties to the Shareholder Agreement as the Individual Defendants do. He cannot use the concept of alternative pleading as an end run around a basic legal impediment to his claim. Because Feldman points to no circumstances under which a party to an agreement may be held liable in tort for interfering with it, he offers the Court no alternative to sustaining the Demurrer to the SAC’s Fifth Cause of Action for inducing breach of a contract. The Individual 2 Reply in Support of Demurrer to Second Amended Complaint 1 | | Defendants cannot be liable for inducing breach of contract as a matter of law, and amendment 2 | | would therefore be futile. 3 (|1L MEET AND CONFER WAS SUFFICIENT 4 As an initial matter, there is no legitimate reason whatsoever for Feldman to decry the 5 | | supposed inadequacy of the Individual Defendants’ meet and confer. 6 Code of Civil Procedure section 430.41, subdivision (a)(1), specifies that, “[a]s part of the 7 | | meet and confer process, the demurring party shall identify all of the specific causes of action that 8 | | it believes are subject to demurrer and identify with legal support the basis of the deficiencies.” 9 | | Defendants’ counsel informed Feldman’s counsel that the Individual Defendants “intend to 10 | | demurrer to the fifth cause of action in Plaintiff’s Second Amended Complaint” and “[w]e believe 11 || the contention fails to state a claim because the individual defendants are party to the Shareholder 12 | | Agreement, and they therefore cannot be liable for inducing its breach.” (Decl. of Mark Wilson, 13 || ISO Opposition, Ex. 1) Further, in their opposition to Feldman’s motion for leave to file the SAC 14 | | (Feldman RIN, Ex. 1), the Defendants cited Allied Equipment Corp. v. Litton Saudi Arabia Ltd. 15 [1(1994) 7 Cal.4™ 503, the seminal case on this issue and the one on which the Individual 16 | | Defendants rely in their Demurrer. They thus easily satisfied the statutory requirements for meet 17 | | and confer. 18 Feldman objects that the Individual Defendants did not identify what Feldman’s counsel 19 | | characterizes as the “additional grounds” of alter ego. (Wilson decl., § 6) But the alter ego 20 | | argument made in the Demurrer is part of the argument that the Individual Defendants cannot be 21 || held liable for inducing breach of a contract to which they are parties, not an “additional ground” 22 | | for demurring. The Demurrer quite clearly states that “[t]he SAC’s alter ego allegations ... further 23 | | defeat any attempt to impose tort liability on them for allegedly interfering with the same 24 || contract” (Demurrer, p. 1:16-19 (emphasis added)) and even argues that “[t]he SAC ... uses the 25 || alter ego theory the same way the Applied Equipment plaintiff used a conspiracy theory—in an 26 | | attempt to distance the Individual Defendants from their own contract—and the Court’s reasoning 27 | | applies equally here.” (Id., p. 7:22-24) It is just plain misleading to suggest that the Individual 28 | | Defendants failed to properly meet and confer when their alter ego argument is based on the very Wolff Mascaro LLP 3. 9160 Irvine Center Dr. ie 2 Reply in Support of Demurrer to Second Amended Complaint 1 | | case that unequivocally holds parties to a contract may not be held liable in tort for interfering 2 | | with it. 3||III. THERE IS NO RULE THAT PARTIES TO A CONTRACT CAN BE HELD 4 LIABLE IN TORT FOR INTERFERING WITH A “DIFFERENT PART OF” THE 5 CONTRACT 6 In his attempt to avoid the unequivocal holding of Applied Equipment, Feldman argues: 7 | | “The rule upon which the Individual Defendants rely (i.e., a plaintiff cannot generally sue a party 8 | | to a contract for interference with that contract) has no application when the contract at issue has 9 | | several parties with different obligations.” (Opp., p. 3:21-23) Tellingly, he cites no legal authority 10 | | for this assertion—because none exists. 11 In fact, the case Feldman cites as warning against “blind application of the rule” (id., p. 12 || 3:25), concerns nonparties to the contract. In Webber v. Inland Empire Invests., Inc. (1999) 74 13 | | Cal. App.4™ 884, the plaintiff was the assignee of a note and deed of trust with which the 14 | | defendants, including corporations controlled by the transferee of the obligation, allegedly 15 | | interfered by means of a sham foreclosure on the security. The defendant corporations—who were 16 | | not parties to or transferees of the loan agreement—tried to use the alter ego allegations by 17 | | themselves to avoid tort liability for interfering with the loan agreement. The Court simply refused 18 | | to extend Applied Equipment to nonparties. It did not warn of the “blind application” of the 19 | | Applied Equipment holding that Feldman attributes to it.! 20 Nor does either of the cases Feldman cites for the overly broad proposition that “owners or 21 | | officers of a business entity can be held liable for interfering with that entity’s contracts” (Opp., p. 22 || 4:22-23) involve parties to the contract. Rather, both considered whether to extend Applied 23 | | Equipment to nonparty officers or owners. They therefore have no application here, where the 24 | | Individual Defendants are not relying on their director-shareholder status to argue immunity from 25 | | tort liability, but rather the very simple fact that they are parties to the Shareholder Agreement. 26 77 | |! Feldman’s further reliance on Webber to avoid the import of the SAC’s alter ego allegations is therefore misplaced. The Individual Defendants have never argued that the alter ego allegations 28 | | alone immunize them from liability, only that the allegations show precisely why it doesn’t matter that the Individual Defendants are not accused of breaching their own contractual obligations. Wolff Mascaro LLP -4- 9160 Irvine Center Dr. ie 2 Reply in Support of Demurrer to Second Amended Complaint 1 In Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal. App.4"h 344—the first case cited 2 | | by Feldman for the absurd proposition that the Individual Defendants can be held liable for 3 | | tortious interference with a contract to which they are parties merely because they are also owners 4 | | and directors of GearShift—the plaintiffs, shareholders in a Fox subsidiary, Fox Family, were 5 | | parties to an agreement that if another shareholder, Saban, “ever sold his shares of Fox Family, 6 | | [they] were required to sell their options in a manner which guaranteed them each 1 percent of the 7 | | sales price of Saban’s Fox Family shares.” (Id. at 347-348.) Saban and Fox, the parent company, 8 | | subsequently entered into a deal in which they sold their shares at a sharply reduced cost “with the 9 | | intent to interfere with” the plaintiffs’ stock options, according to the complaint. Fox, the parent 10 | | company, demurred as a nonparty to the contract, arguing that it owned almost half of Fox 11 | | Family and, therefore, the Applied Equipment holding should be extended to immunize it from 12 | | tort liability. The Court of Appeals reversed the trial court’s order sustaining Fox’s demurrer 13 | | where “Fox argued, and the trial court agreed, that ... Applied Equipment meant that not only were 14 | | contracting parties immune from interference claims, so too were another class of defendants 15 | | who, although not parties to a contract, were not true ‘strangers’ to the contract because they had 16 | | some general interest in the contractual relationship.” (Id. at 352 (emphasis added).) 17 As the Court of Appeals subsequently explained, “Woods merely concludes that a 18 | | shareholder is not automatically immune from liability for interfering with the contractual 19 | | obligations of the company in which it holds shares [citation]; Woods does not stand for the 20 | | proposition that the agent of a contracting party may be liable for interference with its principals 21 || contract.” (Mintz v. Blue Cross of Cal. (2009) 172 Cal. App.4" 1594, 1604 fn. 3.) Feldman’s 22 | | construction of Woods is exactly the one the Court of Appeals disposed of nearly a decade ago. 23 Similarly, in Popescu v. Apple Inc. (2016) 1 Cal. App.5™ 39—the other case cited by 24 | | Feldman as support for his argument that the Individual Defendants can be held liable in tort for 25 | | interference with a contract to which they are parties simply because they are also shareholders 26 | | and directors of GearShift—the defendant was, once again, not a party to the contract. There, the 27 | | plaintiff sued Apple for allegedly causing the plaintiff’s employer to fire him “in retaliation for 28 | | his resistance to Apple’s alleged illegal anticompetitive conduct.” (/d. at 44.) Apple made an Wolff Mascaro LLP -5- 9160 Irvine Center Dr. Shifei2dD Reply in Support of Demurrer to Second Amended Complaint Irvine, CA 92618 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Wolff Mascaro LLP 9160 Irvine Center Dr. Suite 200 Irvine, CA 92618 argument similar to the one Fox made in Wood, seeking to expand the Applied Equipment holding to avoid tort liability for interfering with the employment contract between the plaintiff and his employer. The Court of Appeals held, “We do not read the ... language from Applied Equipment ... to immunize a noncontracting party from tort liability because the noncontracting party has a ‘legitimate interest in the scope or course of the contract’s performance.’” (Id. at 53 (emphasis added).) In fact, both the Woods and Popescu Courts emphasized that the defendants could be held liable in tort specifically because they were not parties to the contract, not, as Feldman argues, because they were owners or officers of the corporations that were. The Woods Court explained that, in Applied Equipment, “there was no dispute that Litton was indeed a party to the contract and the court’s analysis never considered the immunity of someone who was not a party to the contract.” (Woods, 129 Cal. App.4™ at 352.) Furthermore, “[i]n each of [the] cases [cited in Applied Equipment], it was clear that the defendant was either a contracting party or its agent who could not be liable for interfering .... None considered the potential liability of noncontracting parties who had some general economic interest or other stake in the contract.” (/d.) The Popescu Court even used italics to emphasize the distinction between contracting and noncontracting parties: “The issue [in Applied Equipment] was whether a contracting party could be found liable for conspiring with a third party to deprive plaintiff of the benefits of its contract.... The court did not address whether a tort claim for contract interference or conspiracy could be made against a noncontracting party who had a legitimate interest in the contract ....” (Popescu, 1 Cal. App.5" at 53 (emphasis in original).) Feldman thus utterly misconstrues the Individual Defendants’ argument that because they “are parties to the Shareholder Agreement ... [they] consequently have a social and economic interest in GearShift’s contractual relationship with Feldman.” (Demurrer, p. 5:1-2 (emphasis added)) The Individual Defendants have never argued that their economic interest in the Shareholder Agreement by itself immunizes them from tort liability for its breach—because they don’t have to. Their argument on Demurrer, instead, anticipated Feldman’s unsupportable attempt to use the distinction between their obligations as parties to the Shareholder Agreement and -6- Reply in Support of Demurrer to Second Amended Complaint 1 | | GearShift’s contractual obligations to suggest some sort of exception to the Applied Equipment 2 | |rule? 3 The exception to the Applied Equipment rule that Feldman urges this Court to make does 4 | | not exist. Feldman cites no legal authority even remotely suggesting that it does. All of the cases 5 | | he relies on concern nonparties to a contract seeking to extend the holding of Applied Equipment. 6 | | It is not necessary to do so here. The Individual Defendants are parties to the Shareholder 7 | | Agreement and therefore, as a matter of well-established law, cannot be held liable for tortious 8 | | interference with it. 9||IV. FELDMAN MAY NOT AVOID A LEGAL BAR TO HIS CLAIM BY PLEADING 10 IN THE ALTERNATIVE 11 Feldman’s final argument is the nonsensical one that he may plead a legally deficient 12 | | claim by simply labeling it as “pleading in the alternative.” But pleading in the alternative was not 13 || designed to allow plaintiffs to bypass legal bars to their claims. As the Court of Appeals has aptly 14 | | explained: 15 One of the rationales for the [Applied Equipment] court’s decision was the defendant owed no duty in fort not to breach the contract or 16 interfere with its performance; plaintiff had a contract remedy against the breaching party and should not be permitted to add a 17 claim in tort for conduct that really amounted to nothing more than i a breach of contract... That such a result might deprive plaintiff of any remedy against 19 [some of the] defendants is simply reflective of the simple and obvious legal reality that [those] defendants had no obligation to 20 buy out plaintiff’s interest .... 21 || (Kasparian v. County of Los Angeles (1995) 38 Cal. App.4" 242, 265-266 (emphasis added).) 22 At any rate, Feldman is not entitled to plead in the alternative. “A plaintiff may plead 23 | | inconsistent counts or causes of action in a verified complaint, but this rule does not entitle a party 24 | | to describe the same transaction as including contradictory or antagonistic facts. [Citations.] In 25 a 2 By contrast, the distinction between the Individual Defendants’ contractual obligations and 26 | | GearShift’s contractual obligations is, as the Court has already recognized, relevant to their liability for breach of the covenant of good faith and fair dealing, which applies only to parties to 27 | | a contract. There is thus nothing inconsistent about the Individual Defendants noting the distinction when they discuss the good faith and fair dealing claim and arguing that it does not 28 | | matter when it comes to the rule that parties to a contract cannot be held liable for tortious interference with it. Feldman misses this distinction. (Opp., p. 4:1-4) Wolff Mascaro LLP -7- 9160 Irvine Center Dr. [Sean Reply in Support of Demurrer to Second Amended Complaint 1 | | such circumstances, we may accept as true the more specific allegations.” (Alfaro v. Community 2 || Housing Improve. Sys. & Planning Assn., Inc. (2009) 171 Cal. App.4" 1356, 1381-1382.) Only 3 | | “[w]here the exact nature of the facts is in doubt, or where the exact legal nature of plaintiff’s 4 | | right and defendant’s liability depends on facts not well known to the plaintiff, the pleading may 5 | | properly set forth alternative theories in varied and inconsistent counts.” (Rader Co. v. Stone 6 || (1986) 178 Cal.App.3d 10, 29.) To put it simply, a plaintiff may not “blow hot and cold in the 7 | | same complaint on the subject of facts of which he purports to speak with knowledge under oath.” 8 | | (Beatty v. Pacific States Sav. & Loan Co. (1935) 4 Cal.2d 692, 697.) 9 There is no doubt about the facts that immunize the Individual Defendants from liability 10 | | for inducing breach of contract. Feldman knows they are parties to the Shareholder Agreement. 11 | | Feldman attached the Shareholder Agreement containing their individual signatures to the SAC. 12 | | Feldman’s original complaint and first amended complaint recognized that his claims for breach 13 | | of the Shareholder Agreement lie solely in contract. In his third bite at the apple, Feldman is in no 14 | | way entitled to plead in the alternative facts or legal theories that are inconsistent with what he 15 | | knows to be true. 16 No matter how much Feldman may wish for a chance to prevail in both contract and tort, 17 | | he cannot do so as a matter of law. If Feldman can prove that GearShift breached the Shareholder 18 | | Agreement by declining to exercise its purchase option, he is entitled to recover in contract—and 19 | | the Individual Shareholders may be held liable in contract if Feldman also proves that GearShift 20 | | was their alter ego. If Feldman fails on his breach of contract theory, he may pursue tort damages 21 || for breach of fiduciary duty. He has twice tried to bifurcate the trial based on his understanding of 22 | | these two distinct and mutually exclusive theories, one in contract and the other, based on 23 | | allegations that assume no breach of contract, in tort. 24 [| V. CONCLUSION 25 The deficiency in the SAC’s Fifth Cause of Action for inducing breach of contract is 26 | | neither complicated nor a close call. The California Supreme Court has unequivocally held that a 27 | | party to a contract may not be held liable for tortious interference with it. Numerous Courts of 28 | | Appeals have reiterated this rule. None has announced any exceptions to it. Therefore, because Wolff Mascaro LLP =8- 9160 Irvine Center Dr. [Sean Reply in Support of Demurrer to Second Amended Complaint 1 || the Individual Defendants are parties to the Shareholder Agreement, and for the reasons discussed 2 | | above and in the Demurrer, the Court should sustain the Individual Defendants’ Demurrer to the 3 | | SAC’s Fifth Cause of Action without leave to amend. 5 | | Dated: October 5, 2018 WOLFF MASCARO LLP As hoo ML Wf f By: Joshua M. Wolff, Esq. 8 Attorney for Defendants 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Wolff Mascaro LLP -90- 9160 Irvine Center Dr. es Reply in Support of Demurrer to Second Amended Complaint 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Wolff Mascaro LLP 9160 Irvine Center Dr. Suite 200 Irvine, CA 92618 PROOF OF SERVICE I am over 18 years of age and not a party to this action. My business address is 9160 Irvine Center Dr., Suite 200, Irvine, California 92618-4683. On October 5, 2018, I served the foregoing RELY IN SUPPORT OF DEMURRER TO SECOND AMENDED COMPLAINT in the manner below: Mark B. Wilson Attorneys for Plaintiff Roger Amy H. Nguyen Feldman KLEIN & WILSON 4770 Von Karman Ave. If by email, then to: Newport Beach, CA 92660 wilson@kleinandwilson.com 949-631-3300 anguyen@kleinandwilson.com [] U.S. MAIL: I deposited the documents with the U.S. Postal Service, postage prepaid, in Irvine, California. [] OVERNIGHT CARRIER: I delivered the documents, fare prepaid, to a carrier authorized to receive and transport documents for overnight delivery. = ELECTRONIC TRANSMISSION: By court order or agreement of the parties, I transmitted scanned copies of the documents by email or facsimile. The transmission was complete and without error. [Code of Civ. Proc., § 1010.6, subd. (a)(6)] [] PERSONAL DELIVERY: I delivered the documents to a courier authorized to transport documents for personal delivery. I verify this service under California’s penalty of perjury on October 5, 2018, in Irvine, California. Joshua M. Wolff Proof of Service
