Garth Blumenthal vs. Fletcher Jones

Opposition

Cal. Super. - 4th Dist.July 2, 2018

10 1 12 13 14 15 16 17 18 19 20 21 923 23 24 25 26 2 28 ALAN A. GREENBERG, State Bar No. 150827 AGreenberg@GGIrialLaw.com WAYNE R. GROSS, State Bar No. 138828 WGross@GGTrialLaw.com ADAM M. SECHOOLER, State Bar No. 293860 ASechooler@GGTrialLaw.com GREENBERG GROSS LLP 650 Town Center Drive, Suite 1700 Costa Mesa, California 92626 Telephone: (949) 383-2800 Facsimile: (949) 383-2801 Attorneys for Plaintiff Garth Blumenthal ELECTROMICALLY FILED Superior Court of Califarnia, County of Orange 10/29/2018 at 07:10:00 PM Clerk of the Superior Court By & Clerk, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER GARTH BLUMENTHAL, an individual, Plaintiff, Vv. FLETCHER JONES, JR., an individual; FLETCHER JONES MOTORCARS, INC., a California corporation; and DOES 1-10, inclusive, Defendants. 2135172 Case No. 30-2018-01003027-CU-BT-CJC Assigned for All Purposes to: Hon. James J. Di Cesare Department C16 PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS’ DEMURRER Hearing: Date: November 9, 2018 Time: 9:30 a.m. Dept.: C16 Action Filed: July 2,2018 Trial Date: TBD Plaintiffs Opposition to Defendants” Demurrer ~N B W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II. IIL. Iv. 2135172 TABLE OF CONTENTS Page TN TRIO DTIC THON 5556556005 0.504300 555855455 45 AS TARR ARA SSH AHTHA A Sammars 5 SUMMARY OF ALLEGATIONS IN PLAINTIFE’S COMPLAINT. ...ccccecenmminirerernnne 5 ARCTTIVIEINT : ara n0.66.50.5.000085 550500000056 R555 RSS FSA SERS SARA SAAS RHR RTS bam am mst mmm maton 7 Legal SANTA 0mm m sums assassins 7 Blumenthal Properly Pled the Legal Effect of the Relevant Contracts and Defendants’ Request for Judicial Notice Is Improper. ........ceceverrenenenecreeeeereenennes 8 The Court Cannot Take Judicial Notice of the Content and Meaning of the Dealer Agreement, and the Dealer Agreement Does Not Supersede or Terminate the Letter of Intent or the Letter Agreement. .......ccueeeeveeeeeceecieeiinieienes 9 Jones and Motorcars Breached the Letter of Intent and the Letter PABPOBITTCITE: susws 0.50.000.05.68.05.565000855 5 ARRAS SRNR HBAS £8 HA Shamma mrs eA mA 3 a ERS 10 The Statute of Frauds Does Not Bar Blumenthal’s Breach of Contract and Promissory Estoppel Claims Based On Defendants’ Oral Promise to Employ Blumenthal Until Ten Years After the Opening of the Temecula DDB ABET ca ss 58004008004415 545.55 5m sams sninnnnmmansasmnsssnses suns somansansnsssssasssasa ses sammmn wenammmsssavmes 11 The Statute of Limitations Does Not Bar Any of Blumenthal’s Claims.................. 13 The Complaint Properly Alleges Facts Sufficient to State the Sixth Cause of Action for Declaratory Relief........cccovvevenrerireniinenineieceseteesieesenneae se s eren s 14 1. The Complaint Properly Alleges that Blumenthal Entered Into a Partnership Entitling Him to 15% of Motorcars. ......cccceceeververenveneseeeennn.. 14 2. The Statute of Limitations Does Not Bar Blumenthal’s Cause of Action for Declaratory Relief........cocoeevererenenieneiiicicicieesccieeeree 15 The Complaint Properly Alleges that Jones Breached His Fiduciary Duty to Blumenthal When He Failed to Timely Disclose His Intention to Withdraw His Offer to Purchase the Sydney Dealership. .......ccccoeveeeervieniniiienieneeeceeceeen, 16 I. The Complaint Describes a Joint Venture Between Jones and Blumenthal that Imposed Fiduciary Duties on Jones. .......cccccovvevverenrennnnn.. 16 2. The Statute of Limitations on the Fiduciary Duty Claim is Four Years Because Its Gravamen Is Disloyalty, Not Fraud........cccoeeveeveennennenn. 18 CONCLUSION. cotinine sess ss erases eset s best sb este be sb estaba ste se tase neesesaesereene 19 2- Plaintiff’s Opposition to Defendants’ Demurrer Oo 0 Na DY 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Abeyta v. Superior Court C1993) 17 Cal. Appel ¥ 00T co ummumumommnssmrommmssmsssmmmsssmmnsmsmmie s em mmm 11,12 Burnett v. Chimney Sweep (2004) 123 Cal. APPA 1057. sess sbeebs esate enna 9 Byrne v. Harvey (1962) 211 Cal. APP.2A 92... eects eet s ence esses eneas 9 Calada Materials Co. v. Collins (1960) 184 Cal. APP.-2d 250 ...c.uiciiiieirerecteeerrcere secretes erst n ersten sranene 14 Chavez v. Indymac Mortgage Services (2013) 219 Cal ABBA. JO82: ncsuninininsnswsnss sss somos ssn sm mums ms ses 1s a5 sss sis 12 Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Calo Ath, 18 ucscusmmmmessessonsvnsssusummsssossismssss sss moss 995585880588 es s e rams aan 8 Covo v. Lobue (1963) 220 Cal. APP.2d 218. eet steerer eset sbeebs 7 Dalkilic v. Titan Corp. (S.D. Cal. 2007) 516 F.SUPP.2A 1177 ..oeiriiiiiiiiiiiiicniciciciecienresresresnesnesensesetenesse sae sae n s 11, 12 Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654... seers tesserae sre sees sae n ener sas 11 George v. Automobile Club of Southern California (2011) 201 Cal. APP.Ath T112.eciiiieeeieieneni rences cere sec e essen 9,10 Jolly v. Eli Lilly & Co. CLOBE) Ad CBLBd 1 LOD susunsassmonnnsnsn as. somssmsssmossesssssssssssssss ss 5855554850855 005 £54045 085353 ACRES 09% Hin 14 Juran v. Epstein (1994) 25 Cal APD-ATH. B82 cusussssmssnssumosssnssunsumsssssssmsmsonsmmssssisssusomm es mes 12,13 Kisekey v. Carpenters’ Trust for So. California CLO8E 144: Call ApPBil 22 ompmmmmssmmesssssmsmmsmss sss oo mss sis a aS Has 7 Munoz v. Kaiser Steel Corp (1984) 156 Cal. APP.3d 965... eters sess sees sre sbeebs 11 2135172 -3- Plaintiff’s Opposition to Defendants’ Demurrer 10 11 12 13 14 15 16 17 18 19 20 21 2 23 24 25 26 27 28 Nelson v. Abraham (1947) 29 Cal.2Zd 745 eerste eects steers t estes a estas b ashe beset estes e reese ens 17,18 Perez v. Golden Empire Transit District (2012) 209 Cal APPA 1 IIR cssnsmossmnsnamsnnmnasisssn ase came ine 565 5555558 S558 Srmnansemaraes 7 Second Measure, Inc. v. Kim (BLLY, Cal, 2017) 148 Prado] cemmmesmmmmssamsmmamssnemssmmsmmsmsasssmems 15 Simmons v. Ware (2013) 213 Cal. APPATh 1035. etree eters eset ees eben assesses 17 StorMedia Inc. v. Superior Court (1999) 20 Calidth 449... teeters eects testes bases assesses esheets banat esenne 8,9 Thomson v. Canyon (2011) 198 Cal. APP-Ath 594... crete eevee sats aa stasis eta b sass aas eases 18 United Pacific-Reliance Ins. Co. v. DiDomenico (1985) 173 Cal. APP-3d 073... esas e erases assesses seers aaa ese s esas 16 Statutes {Jal. Corp. Code, § 158, 8b. [mmm smi ssi 56am 15 Cal, Corp. Cole, § G05, subd. (8) cement sass 15 2135172 4- Plaintiff’s Opposition to Defendants” Demurrer oO 0 Na ON 10 11 12 13 14 15 16 17 18 19 20 21 7 23 24 25 26 27 28 L INTRODUCTION. Defendants’ Demurrer improperly seeks to argue the facts of the case, presents matters outside the scope of the Complaint through the guise of “judicial notice,” misconstrues Blumenthal’s allegations, and relies on outdated case law. Blumenthal has properly pled facts to support all of his causes of action. Defendants’ demurrer should be overruled in its entirety. IL SUMMARY OF ALLEGATIONS IN PLAINTIFE’S COMPLAINT. As discussed in further detail below and in the Complaint, the Complaint alleges the following facts, which must be taken as true, and which fully and adequately support the causes of action set forth therein. e Jones formed a partnership with Blumenthal in the ownership and control of Motorcars. Blumenthal contributed sweat equity to the partnership, accepting 10% of the net profit and 5% of the gross profit of the business. (Compl. §21.) Jones frequently acknowledged the existence of the partnership by consistently referring to Blumenthal as his “partner,” both to Blumenthal and to third parties. (/bid.) Blumenthal actively participated in the management and control of the business, developing numerous innovative programs that propelled the explosive growth of Motorcars from a bankrupt dealership to the top Mercedes-Benz dealership in the country. (Id. §23.) As aresult of representations by Jones, Blumenthal’s sweat equity contribution, Blumenthal’s responsibility for the management and control of the business, and the understanding of the parties, Blumenthal and Jones formed a partnership, with Blumenthal being entitled to a 15% ownership stake in Motorcars. (ld. 921-24). e In addition to his ownership stake in Motorcars, Blumenthal owned 14.5% of the Fletcher Jones Mercedes-Benz dealership in Henderson, Nevada. (Compl. § 7.) e Jones defrauded Blumenthal out of these and other valuable rights. (Compl. 37, 101-105.) Specifically, in 2006, Jones, individually and on behalf of Motorcars, fraudulently induced Blumenthal to enter into an Agreement of Satisfaction, whereby Blumenthal gave up valuable rights, including his ownership in the Newport Beach and 2135172 =5= Plaintiff’s Opposition to Defendants’ Demurrer Wn Rk Ww ND ~N Oy 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2135172 Henderson dealerships, in exchange for an opportunity to own 100% of a new Mercedes-Benz dealership in Temecula. (Id. § 102.) Jones also promised Blumenthal that he would remain the General Manager at Motorcars until he was able to acquire 100% of the new Temecula dealership. (/bid.) Jones and Motorcars did not intend to perform these promises when they made them. (/bid.) Blumenthal did not know and could not have known that the promises of Jones and Motorcars were fraudulent until Motorcars summarily terminated him in August 2017. (Compl. § 69.) Jones, Motorcars, and Mercedes-Benz entered into a binding Letter of Intent (“LOT”). (Compl. 9 38.) The LOI required Jones to guarantee that Blumenthal would be given the opportunity to maintain his employment as the General Manager of Motorcars for at least five years after the Temecula dealership opened. (Id. 940.) This condition was material to Mercedes-Benz and Blumenthal. (/bid.) In a letter dated October 5, 2012, Mercedes-Benz, Jones, and Blumenthal entered into a written agreement (the “Letter Agreement”) extending the terms of the LOL. (Compl. 41-42.) The Letter Agreement was supported by adequate consideration, and Blumenthal and Mercedes-Benz performed under the terms of the Letter Agreement. (See ibid.) Jones and Motorcars refused to enter into a written employment agreement with Blumenthal, but Jones, through his attorney, assured Blumenthal that he would continue to be employed as General Manager of Motorcars. (Compl. § 50.) In August 2017, Jones and Motorcars breached the LOI and the Letter Agreement by abruptly terminating Blumenthal’s employment at Motorcars without cause, causing Blumenthal to suffer at least $10 million in damages. (Compl. 4 51-52.) Jones and Motorcars also orally promised Blumenthal that he would be employed as General Manager of Motorcars at least until the time that Blumenthal had the opportunity to acquire 100% of Mercedes-Benz of Temecula. (Compl. §53.) In reliance and in exchange for this promise, Blumenthal agreed to extend the time at -&- Plaintiff's Opposition to Defendants’ Demurrer 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 which he could exercise his option to purchase 100% of Mercedes-Benz of Temecula from five years to ten years after the opening of the Temecula dealership. (Id. | 54.) Jones and Motorcars breached this oral promise when they summarily terminated Blumenthal without cause in August 2017. (Id. 797-98.) The breach of this oral agreement caused Blumenthal damages of approximately $40 million in lost earnings. (Id. 756.) e Blumenthal and Jones formed a joint venture to submit a proposal to purchase the Mercedes-Benz dealership in Sydney, Australia (the “Sydney Dealership”), and ultimately to jointly own and operate the Sydney Dealership. (Compl. gf 72-73.) Jones breached his fiduciary duty to Blumenthal when he failed to timely inform Blumenthal that he would not go forward with the purchase of the Sydney Dealership, despite repeated inquiries by Blumenthal. (Id. 9 77-79.) Had Jones timely informed Blumenthal of his decision not to pursue the joint ownership of the Sydney Dealership, Blumenthal would have purchase the Sydney Dealership with a different business partner. (Id. § 83.) Jones acted with malice because Jones did not want Blumenthal to threaten his dominance as a leading Mercedes-Benz dealer, and wanted to control Blumenthal and keep him focused on the management of Motorcars until it suited Jones. (1d. 84.) As aresult of Jones’s breach of his fiduciary duties, Blumenthal suffered damages in the form of lost profits exceeding $100 million. (Id. JY 85-86.) III. ARGUMENT. A. Legal Standard. “[A] general demurrer should not be sustained if the pleading, liberally construed, states a cause of action on any theory.” (Covo v. Lobue (1963) 220 Cal. App.2d 218, 221.) “Material facts alleged in the complaint are treated as true for purposes of ruling on the demurrer,” as are “facts that may be implied or inferred from those expressly alleged.” (Kisekey v. Carpenters’ Trust for So. California (1983) 144 Cal.App.3d 222, 228 [citations omitted].) The court must draw inferences favorable to the plaintiff, not the defendant. (Perez v. Golden Empire Transit District (2012) 209 Cal. App.4th 1228, 1238.) 2135172 <7 Plaintiff’s Opposition to Defendants’ Demurrer 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. Blumenthal Properly Pled the Legal Effect of the Relevant Contracts and Defendants’ Request for Judicial Notice Is Improper. Defendants contend that their Demurrer should be granted because Blumenthal purportedly failed to “set out verbatim all the terms of the written contracts, attach them to the Complaint, or properly plead their legal effect.” (Demurrer at p. 14.) Defendants are wrong. As Defendants acknowledge, a plaintiff need not attach a copy of the written agreement to the complaint. (bid.) “In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199; see also 4 Witkin, Cal. Proc. Sth Plead § 520 (2008) [“the plaintiff need not allege every promise of the defendant, but only those that the plaintiff claims were breached and others that affect them™].) The Complaint properly pleads the legal effect of each of the relevant written contracts. Specifically, the Complaint alleges that (1) the parties entered into a written contract that required the Defendants to guarantee Blumenthal’s employment at Motorcars until five years after the Mercedes-Benz of Temecula dealership opened for business, and (2) that Defendants breached the contract when they summarily terminated Blumenthal’s employment without cause less than five years after the Temecula dealership opened. (See, e¢.g., Compl. 9 38-45, 65-67, 94-97.) The Complaint also extensively quotes verbatim from the written contracts at issue. (See, e.g., id. 38, 40-42, 45, 65.) This is more than sufficient to satisfy the requirement that a plaintiff plead the legal effect of a contract. (See, e.g., Construction Protective Services, Inc. v. TIG Specialty Ins. Co., supra, 29 Cal.4th at pp. 198-199 [allegation that insurance policy obligated defendant to defend and indemnify plaintiff and that claim fell within the scope of the contract sufficient].) Defendants also request that the Court take judicial notice of six different agreements. (See Demurrer at p. 14; Defendants’ Request for Judicial Notice, Exhs. 2-7.) Defendants support their Request for Judicial Notice by citing StorMedia Inc. v. Superior Court. (Demurrer at p. 14.) But the very language Defendants cite makes it clear that Defendants” Request for Judicial Notice is improper. StorMedia states that a court may take judicial notice of the “existence of a document,” but “the truthfulness and proper interpretation of the document” remain “disputable.” 2135172, -8- Plaintiff’s Opposition to Defendants’ Demurrer 0 uN oO 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (StorMedia Inc. v. Superior Court (1999) 20 Cal.4th 449, 457, fn. 9, emphasis added.) Here, Defendants do not ask the Court to take judicial notice of the mere existence of a document, but of its content and meaning. Defendants’ Request for Judicial Notice is improper and should be denied. Cs The Court Cannot Take Judicial Notice of the Content and Meaning of the Dealer Agreement, and the Dealer Agreement Does Not Supersede or Terminate the Letter of Intent or the Letter Agreement. Defendants request that the Court take judicial notice of purported Dealer Agreements between Mercedes-Benz and the LLC that owns Mercedes-Benz of Temecula. As discussed above, however, Defendants’ Request for Judicial Notice is improper, and Defendants’ attempt to argue facts not pled in the Complaint is inappropriate at the demurrer stage. In addition, the cases Defendants cite are inapposite. For example, Defendants cite Burnett v. Chimney Sweep (2004) 123 Cal. App.4th 1057. That case, however, involved an unsigned copy of the relevant contract that had been attached to the complaint. (Id. at pp. 1063-1064.) Without objection, the moving party submitted a signed copy of the contract with its motion for judgment on the pleadings. (Ibid.) Byrne v. Harvey (1962) 211 Cal.App.2d 92 similarly involved a contract attached to the complaint and incorporated by reference. (Id. at p. 103.) Here, in contrast, Blumenthal did not attach any such “dealer agreement” to his Complaint and he objects to Defendants’ Request for Judicial Notice. Defendants also cite George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112 for the proposition that a court can interpret the language of a contract and determine whether “‘the contract is reasonably subject to a construction sufficient to sustain a cause of action for breach.” (Demurrer at p. 15 [quoting George v. Automobile Club of Southern California, supra, 201 Cal.App.4th at p.1125].) But George holds that “‘[t]he motion for judgment on the pleadings can be granted only if the instrument incorporated by reference conclusively negates the express allegation in the pleading, and except in the extraordinary case, conclusive negation is unlikely because of the inevitable prospect that parol evidence may lead to an interpretation of the contract consistent with the pleading’s express allegation.” (George v. 2135172 -0- Plaintiff’s Opposition to Defendants’ Demurrer wn Rk W N ~ N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Automobile Club of Southern California, supra, 201 Cal.App.4th at p. 1127, emphases added [quoting Columbia Casualty Co. v. Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 470].) Again, no “dealer agreement” was incorporated by reference into the Complaint. Moreover, far from “conclusively negating” the allegations in the Complaint, the Dealer Agreements that Defendants attach to their Request for Judicial Notice only purport to “terminate[] and supersede[]” prior agreements between the parties to the extent that they relate “to the subject matters covered herein.” (Demurrer at pp. 15-16.) Nothing in the Dealer Agreements relates to Blumenthal’s employment at Motorcars, which is the subject of the breach of contract claims in this action. Accordingly, the Dealer Agreements do not supersede or terminate the Letter of Intent or the Letter Agreement, or in any other way contradict or negate the allegations in the Complaint. D. Jones and Motorcars Breached the Letter of Intent and the Letter Agreement. Defendants also argue that Jones and Motorcars complied with the terms of the Letter of Intent and the Letter Agreement. First, Defendants argue that “Mercedes-Benz would not have entered into the Dealer Agreements and the Temecula Dealership would not have opened if Mr. Jones and Motorcars had not satisfied the terms of the LOI and the Letter Agreement.” (Demurrer atp. 16.) There are several problems with this argument: (1) it relies on the improper Request for Judicial Notice of the Dealer Agreements discussed above; (2) it argues a factual question about what Mercedes-Benz would or would not have done, which is not appropriate on demurrer; and (3) it ignores the Complaint’s allegation that Defendants breached their obligation to employ Blumenthal affer the Temecula dealership opened. (See 9 Compl. 51-52.) Second, Defendants argue that Jones and Motorcars complied with their obligation to provide Blumenthal with the “opportunity” to remain employed as the General Manager of Motorcars until five years after the opening of the Temecula dealership under the written contracts or ten years after the opening of the Temecula dealership under the oral agreement. Defendants cannot seriously contend, however, that they provided Blumenthal with an opportunity to remain employed at Motorcars when they abruptly terminated him without warning and without cause. (Compl. § 51.) At a minimum, whether or not Defendants provided Blumenthal with an 2135172 -10- Plaintiff’s Opposition to Defendants’ Demurrer wd ~N ON 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “opportunity” to remain employed at Motorcars is a factual question that cannot be decided on the pleadings. E. The Statute of Frauds Does Not Bar Blumenthal’s Breach of Contract and Promissory Estoppel Claims Based On Defendants’ Oral Promise to Employ Blumenthal Until Ten Years After the Opening of the Temecula Dealership. Defendants also argue that the statute of frauds bars Blumenthal’s causes of action for breach of contract and promissory estoppel based on the agreement by Jones and Motorcars to employ Blumenthal as General Manager of Motorcars until ten years after the opening of Mercedes-Benz of Temecula. (Demurrer at pp. 17, 19.) The statute of frauds does not bar these causes of action for at least two reasons. First, the agreement to employ Blumenthal for ten years after the opening of the Temecula dealership does not fall within the statute of frauds. To support their argument, Defendants cite Munoz v. Kaiser Steel Corp (1984) 156 Cal. App.3d 965. Munoz, however, “does not appear to be reflective of the current state of California statute of frauds case law,” because it predates the California Supreme Court’s decision in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, as discussed in Abeyta v. Superior Court (1993) 17 Cal. App.4th 1037. (Dalkilic v. Titan Corp. (S.D. Cal. 2007) 516 F.Supp.2d 1177, 1194.) In Abeyta v. Superior Court, supra, 17 Cal.App.4th 1037, the Court of Appeal held that the ee statute of frauds ““applies only to contracts which by their terms, cannot possibly be performed within one year.” (Id. at p. 1042, emphasis added [quoting White Lighting Co. v. Wolfson (1968) 68 Cal.2d 336].) The Abeyta court noted that, in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, the California Supreme Court rejected the lower court’s dismissal on statute of frauds grounds of the plaintiff’s oral employment contract claims. (/bid.) In Foley, the California Supreme Court held that “[e]ven if the original oral agreement had expressly promised plaintiff ‘permanent’ employment terminable only on the condition of his subsequent poor performance or other good cause, such an agreement, if for no specified term, could possibly be completed within one year.” (Foley v. Interactive Data Corp., supra, (1988) 47 Cal.3d 654, 672-673.) 2135172 -11- Plaintiff’s Opposition to Defendants’ Demurrer °K N Y \O 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A contract for employment longer than one year can still be fully performed in less than one year “[blecause the employee can quit or the employer can discharge for cause.” (Ibid.) Accordingly, “courts have rejected the application of statute of frauds because ‘a plaintiff could have (1) been discharged for cause; (2) retired, died or voluntarily left employment; or (3) been terminated if declining profitability compelled a general layoff or cessation of business altogether.” (Dalkilic v. Titan Corp., supra, (S.D. Cal. 2007) 516 F.Supp.2d at p- 1193 [quoting Abeyta v. Superior Court, supra, 17 Cal.App.4th at p. 1042].) Here, the oral agreement provided that Blumenthal “would remain General Manager of Motorcars until such time as he was able to exercise his option to purchase 100% of Mercedes- Benz of Temecula.” (Compl. § 98.) This oral agreement could have been performed within one year in a number of ways. For example, Blumenthal could have purchased 100% of Mercedes- Benz of Temecula in less than one year. Blumenthal also could have been ““discharged for 6cc cause,” quit voluntarily, or had his position terminated because of a “‘cessation of business altogether.”” (Dalkilic v. Titan Corp., supra, (S.D. Cal. 2007) 516 F.Supp.2d at p. 1193 [quoting Abeyta v. Superior Court, supra, 17 Cal.App.4th at p. 1042].) The oral employment agreement, therefore, does not fall within the statute of frauds. Second, Defendants are estopped from using the statute of frauds defense. Courts “have the power to apply equitable principles to prevent a party from using the statute of frauds where such use would constitute fraud.” (Juran v. Epstein (1994) 23 Cal.App.4th 882, 895.) “Accordingly, equitable estoppel may preclude the use of a statute of frauds defense.” (Chavez v. Indymac Mortgage Services (2013) 219 Cal.App.4th 1052, 1058.) “Generally, ‘four elements must be present in order to apply the doctrine of equitable estoppel: (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.”” (Ibid. [quoting Driscoll v. City of Los Angeles (1967) 67 Cal.2d 297, 305].) Importantly, “[w]hether a party is precluded from using the statute of frauds defense in a given case is generally a question of fact.” (Ibid.) 213517.2 =]2- Plaintiff’s Opposition to Defendants’ Demurrer 0 9 \O 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The doctrine of equitable estoppel permits “enforcement of an oral agreement to prevent fraud when one party has detrimentally relied on an oral promise or another party has been unjustly enriched.” (Juran v. Epstein, supra, 23 Cal.App.4th at p. 892, emphasis added.) Both of these conditions apply here. In reliance on Defendants’ promise that Blumenthal would maintain his employment at Motorcars, Blumenthal agreed to extend the time at which he could exercise his right to purchase 100% of Mercedes-Benz of Temecula from five years to ten years after the dealership’s opening. (Compl. 198.) In doing so, Blumenthal lost a very valuable right to purchase the dealership on favorable terms a mere five years after its opening, a right that would have enabled Blumenthal to own 100% of Mercedes-Benz of Temecula in April 2019. (See Compl. 44.) In addition, Defendant Jones was unjustly enriched because J ones gained the corresponding right to own part of Mercedes-Benz of Temecula for another five years. Thus, Defendants are equitably estopped from asserting the statute of frauds defense. Moreover, the question of whether Defendants are precluded from using the statute of frauds defense is a fact issue that is not appropriately decided on demurrer. In sum, the oral promise to permit Blumenthal to remain General Manager of Motorcars until he could exercise his right to buy 100% of Mercedes-Benz of Temecula does not fall within the statute of frauds, and Defendants are equitably estopped from asserting the statute of frauds defense. F. The Statute of Limitations Does Not Bar Any of Blumenthal’s Claims. Defendants contend that Blumenthal’s claims for breach of contract, promissory fraud, and rescission are barred by the statute of limitations. (Demurrer at pp. 17-19.) Each of these arguments is based on the faulty premise that the statute of limitations began to run when Defendants refused to enter into a written employment agreement with Blumenthal. (See Compl. 9197.) Despite Defendants’ refusal to enter into a written employment agreement, however, Motorcars continued to employ Blumenthal until August 2017. (Id. 4 51.) Moreover, Jones (through his personal attorney and most trusted legal advisor) assured Blumenthal that Motorcars would continue to employ him and that he did not need to worry about being terminated. (Jd. 50.) As expressly pled in the Complaint, “Blumenthal had no way to know that the promises of 2135172 -13- Plaintiff’s Opposition to Defendants’ Demurrer Ww ~ N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Jones and Motorcars were fraudulent until Motorcars summarily terminated him in August 2017.” (Id. 7 69.)! In addition, Blumenthal suffered no injury until he was terminated. Until that time, he continued to be paid as General Manager of Motorcars, and Jones assured him that his employment would continue. (Compl. f 50-51.) Accordingly, Blumenthal’s causes of action did not accrue until Motorcars abruptly terminated him without cause. (See, e.g., Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1109 [“an action accrues on the date of injury”].) G. The Complaint Properly Alleges Facts Sufficient to State the Sixth Cause of Action for Declaratory Relief. 1. The Complaint Properly Alleges that Blumenthal Entered Into a Partnership Entitling Him to 15% of Motorcars. The Complaint alleges (1) that Blumenthal received a significant and agreed upon share of the business’s gross and net profits; (2) that Blumenthal chose to benefit as a partner over the long term by contributing sweat equity and forgoing higher income in the short term; (3) that Jones consistently referred to Blumenthal as his “partner” to Blumenthal and third parties; (4) that Blumenthal actively participated in the management and control of the business; and (5) that as a result of the foregoing and the understanding of the parties, “Blumenthal was a partner with Jones in Motorcars, with Blumenthal owning 15% of the business.” (Compl. 1] 21-24.) Defendants argue that the Complaint does not allege “plausible facts from which to conclude that [Blumenthal] had any ownership interest . . . in Motorcars.” (Demurrer at p. 20.) But the foregoing allegations are more than sufficient to support the claim that Blumenthal was a partner. “A partnership need not be evidenced by a writing. It may be oral. [Citation.] And where there is no writing evidencing the agreement, the existence of a partnership may be evidenced by the conduct of the parties. [Citation.]” (Calada Materials Co. v. Collins (1960) 184 Cal.App.2d 250, ! Blumenthal also learned of the fraud because “at the same time he was terminated, Motorcars presented Blumenthal with a document for Jones to purchase Blumenthal’s interest in the Temecula dealership for a price far below its value and which would have prevented Blumenthal from ever exercising the Blumenthal Option.” (Compl. § 69.) It was not until then that Blumenthal learned that “this had been [Jones’s] plan all along.” (/bid.) 2135172 -14- Plaintiff’s Opposition to Defendants’ Demurrer Ww ~ N 10 11 12 13 14 15 16 17 18 19 20 21 2) 23 24 25 26 27 28 253.) “The presence or absence of [co-ownership of property, sharing of gross returns, and sharing of business profits] is not dispositive as to whether a joint venture or partnership was actually formed . ...” (Second Measure, Inc. v. Kim (N.D. Cal. 2015) 143 F.Supp.3d 961, 972.) “Instead, the existence of a joint venture or partnership depends on the overall set of facts and circumstances about the business relationship.” (/bid.) Defendants also claim that Blumenthal could not possibly have formed a partnership entitling him to 15% of Motorcars because Motorcars is a corporation. This argument overlooks the fact that a partnership can own a corporation. (See, e.g., Cal. Corp. Code, § 158, subd. (d) [providing that “[i]n determining the number of shareholders . . . a partnership . . . holding shares shall be counted as one”; Cal. Corp. Code, § 605, subd. (a)(2) [“[s]hares identified as held of record by . . . a partnership . . . shall be included as so held by one person”].) Accordingly, although Motorcars is a corporation, this does not mean that Blumenthal could not have formed a partnership resulting in Blumenthal owning 15% of Motorcars. Furthermore, “[t]he existence of a partnership or joint venture is a question of fact . . . .” (Second Measure, Inc. v. Kim, supra, 143 F.Supp.3d at p. 971.) In sum, the issue of whether Blumenthal entered into a partnership entitling him to 15% of Motorcars is a factual question that cannot be decided on demurrer given the facts pled in the Complaint. 2. The Statute of Limitations Does Not Bar Blumenthal’s Cause of Action for Declaratory Relief. The Complaint alleges that from the outset of their relationship, Jones represented to Blumenthal and others that they were “partners” in Motorcars and that Blumenthal would have a substantial share of the company’s profits: 10% of net profit and 5% of gross. (Compl. qf 21, 60- 61.) Blumenthal further contributed sweat equity and chose to accept a smaller share of profits in the short term while growing the business to Provide for a larger share in the long term. (Ibid) Blumenthal relied on Jones's promises in helping to build the dealership, and was thus a 15% partner in Motorcars. (Id. 41 24, 62.) In September 2006, Jones fraudulently induced Blumenthal to relinquish his ownership in Motorcars through a written agreement providing that Blumenthal 213517.2 -15- Plaintiff's Opposition to Defendants’ Demurrer 10 11 12 13 14 135 16 17 18 19 20 21 22 23 24 25 26 27 28 would have the option to buy Jones’s ownership in the Temecula dealership and would remain employed as General Manager of Motorcars until he could exercise that option. (Id. ] 63-67.) It was not until August 2017, when Jones terminated Blumenthal and began trying to force him out of the Temecula dealership, that Blumenthal knew or could have known that the 2006 agreement was fraudulent, as Jones had never intended to honor it. (Id. § 68-69.) Blumenthal seeks rescission of the 2006 agreement and a declaration that he has a 15% partnership interest in Motorcars. (Id. §f 107, 113-116.) Jones argues that the statute of limitations for such a claim ran either in the 1990s, when Jones allegedly treated Blumenthal as an employee, or else in 2006, when the fraudulent agreement was signed. But this misconstrues Blumenthal’s claim. “Until some conventional right of action has accrued, the statute of limitations does not operate independently to cut off the right to bring one for declaratory relief, and after a ‘coercive’ right of action has accrued the alternative right to bring an action for the declaratory remedy continues concurrently with the ‘coercive’ right of action.” (United Pacific-Reliance Ins. Co. v. DiDomenico (1985) 173 Cal.App.3d 673, 676.) Here, the relevant ‘coercive’ right of action is fraud, as Blumenthal has alleged that Jones fraudulently misled him into signing the 2006 agreement. As Jones has noted, the statute of limitations for fraud is three years, and begins to run from the time the plaintiff discovered the fraud. (Demurrer at p. 18.) Here, as alleged in the Complaint, Blumenthal had no way to know of this fraud until August 2017, when he was summarily terminated without cause. (Compl. 69.) Thus, Blumenthal’s claim for declaratory relief is well within the limitations period. H. The Complaint Properly Alleges that Jones Breached His Fiduciary Duty to Blumenthal When He Failed to Timely Disclose His Intention to Withdraw His Offer to Purchase the Sydney Dealership. 1. The Complaint Describes a Joint Venture Between Jones and Blumenthal that Imposed Fiduciary Duties on Jones. Jones’s own prime authority undermines his claim that Blumenthal has not alleged that the Sydney dealership project entailed either a partnership or a joint venture. A partnership connotes co-ownership of partnership property with a “sharing in the profits and losses of a continuing 2135172 -16- Plaintiff’s Opposition to Defendants’ Demurrer Ww Oo 0 uN 10 11 12 13 14 15 16 17 18 19 20 21 5) 23 24 25 26 27 28 business.” (Nelson v. Abraham (1947) 29 Cal.2d 745, 749, citations omitted.) A joint venture, meanwhile, “has no corporate or partnership designation,” but rather can be formed as “an undertaking by two or more persons jointly to carry out a single business enterprise for profit.” (Ibid.) Such a venture or undertaking may be formed by parol agreement, and may even be “assumed as a reasonable deduction from the acts and declarations of the parties.” (/d. at pp. 749- 750.) Whether a joint venture exists “depends on the intentions of the parties,” and is a “question of fact to be determined by the jury.” (Simmons v. Ware (2013) 213 Cal.App.4th 1035, 1052.) Here, the Complaint alleges the classic elements of a partnership and joint venture to pursue a business opportunity. It states that after discussing the matter with Blumenthal, Jones “decided to partner” with Blumenthal and entered into a joint venture with him to submit an offer to buy the Sydney dealership. (/d. at § 73.) It further alleges that Jones, as part of this agreement with Blumenthal, submitted a formal offer to purchase the Sydney Dealership, stating that “we” were “committed” to “being strong business partners” with Mercedes-Benz Australia. (/d. at J 74.) It also alleges that under the terms of the offer, Blumenthal was to have joint ownership of the holding companies that would own the dealership and the real estate on which it was located. (Id. at § 75.) This arrangement meets all the criteria for a partnership or a joint venture as described in Defendants’ chosen authority, Nelson. Under the proposal, as described in the Complaint, Jones and Blumenthal were both integral components of the purchase offer. They were to have co- ownership of the relevant entity and thus of the underlying business and property-the dealership and land-and were to share the profits or losses of running that business: Nelson’s definition of a partnership. (See Nelson, supra, at p. 749.) At a minimum, the “acts and declarations” of Jones and Blumenthal evidenced their “undertaking” to together “carry out a single business enterprise for profit”: the definition of a joint venture. (See id. at p. 750.) Defendants attempt to minimize the joint purchase offer that Jones and Blumenthal submitted together as something less than a business venture-in their words, a “potential intent to explore a possible opportunity and possibly enter into a joint venture.” (Demurrer at p. 22.) But it was more than that. It was a written offer, complete with plans for joint ownership, a holding 2135172 -17- Plaintiff’s Opposition to Defendants’ Demurrer ~N > 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 company structure, and anticipated financing, arrived at after extensive preparatory work by Blumenthal. In the words of Jones, it followed his and Blumenthal’s analysis of the Sydney market, and reflected a “commit[ment]” to that market. (Compl. § 74.) That there was no signed joint venture or partnership agreement does not matter; Nelson makes clear that the relationship can be established through informal means. As alleged in the Complaint, Jones’s words and acts induced Blumenthal to believe that the two of them would be pursuing the Sydney opportunity together as partners, and that Blumenthal would not have to seek an alternative joint venture partner or financing source. That is the precise relationship of trust that epitomizes a partnership or joint venture arrangement, and Blumenthal was entitled to presume that it would not be violated. 2. The Statute of Limitations on the Fiduciary Duty Claim is Four Years Because Its Gravamen Is Disloyalty, Not Fraud. Jones’s statute of limitations argument rests on the false premise that Blumenthal’s claim regarding the Sydney dealership is really a fraud claim, which would call for a three-year limitations period, rather than a four-year period. Not so. As described in the Complaint, the fiduciary duty claim is based on disloyalty-by agreeing to prepare a joint offer and then pulling out at the last minute when it was too late for Blumenthal to partner with someone else, Jones acted in pursuit of his own selfish interests to the detriment of his partner, Blumenthal. That is a straight breach of fiduciary duty and is not dependent on any showing of actual or constructive fraud. This case compares to Thomson v. Canyon (2011) 198 Cal.App.4th 594. In Thomson, the plaintiff alleged that her real estate agent, after promising to prepare certain documentation to enable a transaction, failed to do so. When the plaintiff sued for breach of fiduciary duty, the agent-like Jones here-asserted that a three-year statute of limitations applied to bar the claim, as its gravamen was fraud. The court disagreed, finding that “[m]isrepresentation is not the crux of this case,” as “the gravamen on plaintiff’s complaint is not th[e] false reassurance but the failure of defendant to perform his duty.” (Id. at p. 607.) In that case, the duty involved preparing the documents; in this case, it involved continuing with the offer or advising Blumenthal of the 2135172 -18- Plaintiff’s Opposition to Defendants’ Demurrer 10 11 12 13 14 15 16 17 18 19 20 21 3) 23 24 25 26 27 28 change in plans in time for Blumenthal to make alternative arrangements. In both cases, the four- year statute of limitations applies. IV. CONCLUSION. Plaintiff respectfully request that the Court overrule Defendants” demurrer in its entirety. Should the Court sustain any portion of the demurrer, Plaintiff requests leave to amend. DATED: October 29, 2018 2135172 GREENBERG GROSS LLP Alan A. Greenberg Wayne R. Gross Adam M. Sechooler Attorneys for Plaintiff Garth Blumenthal -19- Plaintiff’s Opposition to Defendants” Demurrer 10 11 12 13 14 15 16 17 18 19 20 21 pa 23 24 25 26 27 28 PROOF OF SERVICE Blumenthal v. Fletcher Jones, Jr. Case No. 30-2018-01003027-CU-BT-CJC STATE OF CALIFORNIA, COUNTY OF ORANGE At the time of service, I was over 18 years of age and not a party to this action. I am employed in the County of Orange, State of California. My business address is 650 Town Center Drive, Suite 1700, Costa Mesa, CA 92626. On October 29, 2018, I served true copies of the following document(s) described as PLAINTIFF'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS’ DEMURRER on the interested parties in this action as follows: SEE ATTACHED SERVICE LIST BY MAIL: I enclosed the document(s) in a sealed envelope or package addressed to the persons at the addresses listed in the Service List and placed the envelope for collection and mailing, following our ordinary business practices. I am readily familiar with the practice of Greenberg Gross LLP for collecting and processing correspondence for mailing. On the same day that correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postage fully prepaid. I am a resident or employed in the county where the mailing occurred. The envelope was placed in the mail at Costa Mesa, California. BY ELECTRONIC SERVICE: I served the document(s) on the person listed in the Service List by submitting an electronic version of the document(s) to One Legal, LLC, through the user interface at www.onelegal.com. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on October 29, 2018, at Costa Mesa, California. uo Lelie Kibota 2135172 Sf Plaintiff's Opposition to Defendants’ Demurrer 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 5 28 SERVICE LIST Blumenthal v. Fletcher Jones, Jr. Case No. 30-2018-01003027-CU-BT-CJC Aaron H. Jacoby (SBN 137244) Jeffrey R. Makin (SBN 252426) Douglas E. Hewlett, Jr. (SBN 293438) ARENT FOX LLP 555 West Fifth Street, 48" Floor Los Angeles, CA 90013-1065 Telephone: (213) 629-7400 Facsimile: (213) 629-7401 Email: aaron.jacoby@arentfox.com Jeffrev.makin@arentfox.com 2135172 = Plaintiff's Opposition to Defendants' Demurrer