David McKay vs Hopp Technologies Inc et al

Case Number

23CV00809

Case Type

Hearing Date / Time

Fri, 03/08/2024 - 10:00

Nature of Proceedings

CMC; Demurrer and Motion to Strike

Tentative Ruling

(1) For all reasons discussed herein, the demurrer of defendants to plaintiff’s first amended complaint is overruled.

(2) For all reasons discussed herein, the motion of defendants to strike portions of plaintiff’s first amended complaint is denied.

(3) Defendants Ratna Madeka and Matt Barnes shall file and serve their answer to plaintiff’s first amended complaint on or before March 18, 2024.

Background:

On February 28, 2023, plaintiff David McKay filed a complaint against defendants Hopp Technologies, Inc., (Hopp), Fabrice Allain (Fabrice), Antoine Allain (Antoine), Ratna Madeka (Madeka); Matt Barnes (Barnes), Khalid Taylor (Taylor), and Ray Young (Young) (collectively, defendants), alleging nine causes of action: (1) fraud; (2) civil conspiracy to defraud; (3) breach of fiduciary duties; (4) breach of contract; (5) negligent misrepresentation; (6) recission and restitution; (7) cancellation of instrument; (8) aiding and abetting; and (9) unjust enrichment/restitution. (Note: To avoid confusion, defendants with common surnames will be referred to by their first names. No disrespect is intended.)

On September 15, 2023, plaintiff filed a first amended complaint (the FAC) alleging the same nine causes of action: 1) fraud (against all defendants); (2) civil conspiracy to defraud (against all defendants); (3) breach of fiduciary duties (against all defendants); (4) breach of contract (against Hopp only); (5) negligent misrepresentation (against all defendants); (6) recission and restitution (against all defendants); (7) cancellation of instrument (against all defendants); (8) aiding and abetting (against Hopp and Barnes only); and (9) unjust enrichment/restitution (against all defendants).

The allegations of the operative FAC are set forth in a disjointed manner with identical or substantially similar facts appearing in different numbered paragraphs throughout the pleading. In addition, allegations which appear to be common to all causes of action alleged in the FAC are set forth in the first cause of action only. The manner in which plaintiff has set forth the allegations of the FAC has made it difficult for the court to summarize the material allegations of the FAC. As alleged or effectively alleged in the FAC:

Hopp is a rideshare company based in Santa Barbara County, California. (FAC, ¶ 12.) During the events alleged in the FAC, Madeka was a board member and the Chief Technology Officer of Hopp. (Id. at ¶ 12.) Madeka was also the Chief Executive Officer and Vice President of Octos Global Solutions, LLC (Octos) and the Chief Executive Officer of Reinforce Global (Reinforce). (Id. at ¶¶ 20(A), 20(E)(8) & (10), 53.)

In November 2021, Madeka spoke to plaintiff about an investment opportunity in Hopp. (FAC, ¶ 12.) Madeka told plaintiff that Hopp was the first “ ‘[s]ocial [c]arpooling’ [a]pp” and needed plaintiff’s investment for marketing purposes in order to procure riders and drivers. (Ibid.) Madeka also told plaintiff that Hopp had multimillion dollar investors lined up and that all that they needed to show was cash flow. (Id. at ¶¶ 12, 20(E)(6).) In December 2021, Madeka told plaintiff that Octos was developing the online “app” needed by Hopp in exchange for a portion of shares in Hopp which would be relinquished in exchange for payment when funding from venture capital was received. (Id. at ¶ 20(A).) Madeka knew these representations were false at the time they were made. (Id. at ¶ 12.)

On December 16, 2021, plaintiff signed a non-disclosure agreement. (FAC, ¶ 14.) On the same day, Madeka sent to plaintiff the revenue model and business plan for Hopp. (Id. at ¶ 15.) On December 22, 2021, Madeka sent plaintiff an email claiming that Hopp is incorporated in California as a “C” corporation and that the current valuation of Hopp was $9 million. (Id. at ¶¶ 16, 20(C).) On December 23, 2021, Madeka pressured plaintiff to secure plaintiff’s investment claiming that the deal was fair and that plaintiff’s interest would be protected. (Id. at ¶ 17, 20(D).)

On January 21, 2022, Madeka sent plaintiff a “Common Stock Purchase Agreement” (the Stock Purchase Agreement) which contained material terms regarding whether there had a “material adverse event” as defined in the Stock Purchase Agreement, whether there were any resignations or terminations of any officer or employee of Hopp, whether Hopp had entered into transactions which were not in the ordinary course of business, whether there existed capital expenditures or indebtedness in excess of $10,000, and whether Hopp had incurred liabilities individually in excess of $10,000 or $25,000 in the aggregate. (FAC, ¶¶ 20(E)(1)-(10) & 26.)

On January 21, 2022, plaintiff signed the Stock Purchase Agreement and a Shareholder Agreement, agreeing to become a shareholder of Hopp. (FAC, ¶¶ 24, 25, 29.) On February 1, 2022, plaintiff wired $300,00 to Hopp for the purchase of 1,500,000 shares of Hopp’s common stock. (Id. at ¶¶ 22, 28, 77.)

The representations contained in the Stock Purchase Agreement were false. For example, defendants did not disclose to plaintiff that Hopp’s Chief Financial Officer Eve Mitchell (Mitchell) had resigned. (FAC, ¶¶ 20(E)(2) & 27.) Mitchell contacted plaintiff by phone in early April 2022 and informed plaintiff that Mitchell was one of the co-founders of Hopp and that Mitchell had to resign because of the way that Mitchell was treated by other members and because of defendants’ unscrupulous handling of Hopp’s finances. (Id. at ¶ 30.) On April 9, 2022, Madeka confirmed to plaintiff that Mitchell had resigned. (Id. at ¶ 31.)

Defendants also did not disclose to plaintiff that in August 2019, Hopp and Octos had agreed that Octos would receive monetary payment to develop the app under a promissory note (the promissory note), and that Octos would also receive a 25 percent interest in Hopp which would never be relinquished, contrary to what Madeka told plaintiff in December 2021. (FAC, ¶¶ 20(A), 20(B), 20(E)(1), (3), (4), (6)-(8), (10), 23, 27.) Also unknown to plaintiff, defendants agreed that Reinforce would receive a 15 percent interest in Hopp which would also never be relinquished. (Id. at ¶ 20(B), 20(E)(1), 27.) Defendants also did not disclose that there was a debt owed by Hopp to Media 34. (Id. at ¶ 27.)

Octos, Reinforce, and Media 34 were either owned by or affiliated with Madeka, Barnes, Taylor, and Young. (FAC, ¶ 27.) Because the shares in Hopp would never be relinquished by Octos or Reinforce, plaintiff’s investment would be diluted notwithstanding that the Stock Purchase Agreement limited dilution to future investments. (Id. at ¶ 20(B).) In addition, Hopp did not have the capacity to conduct business until the promissory note was paid in full. (Id. at ¶ 20(E)(9).) Hopp’s only actual value, if any, was the app that was being developed by Octos. (Id. at ¶ 20(C).)

Rather than using plaintiff’s investment for marketing purposes as represented by Madeka and using venture capital to pay for development of the app, the day after plaintiff was induced to invest in Hopp, Hopp used plaintiff’s investment to pay to Octos the amount of $167,000 on the promissory note (the Octos Payment). (FAC, ¶¶ 20(A), (B), (E)(3), (6) & (7), 22.) Hopp also paid Media 34 the amount of $10,800 (the Media 34 Payment). (Id. at ¶ 20(A) & (E)(4).)

Unknown to plaintiff, defendants intended that plaintiff’s investment be used for the substantial debts which were owed to Madeka’s companies and of which defendants had knowledge, including the Octos Payment. (FAC, ¶¶ 20(B), 50.) Plaintiff believes that before he entered the Stock Purchase Agreement, Madeka was pressuring Fabrice and Mitchell for payment on the pre-existing obligation and told them that Madeka would find her own investor. (Id. at ¶ 50.) The debts owed to Madeka’s companies were not disclosed to plaintiff during the efforts to induce plaintiff to make the $300,000 investment in Hopp. (Ibid.) Fabrice, Antoine, Madeka, Young, and Taylor paid the same invoice 3 different times to circumvent Hopp’s bylaws. (Id. at ¶ 51.) Using plaintiff’s investment to make the undisclosed Octos Payment materially impaired Hopp’s operations. (Id. at ¶ 20(E)(6).)

On April 12, 2022, Fabrice sent an email to plaintiff acknowledging the Octos Payment and demonstrating that defendants had prior knowledge of the debt to Octos which was never disclosed to plaintiff despite earlier representations that plaintiff’s investment was to be used for marketing purposes in order to procure riders and drivers. (FAC, ¶ 35.)

Also on April 12, 2022, defendants held a Board meeting with Fabrice, Madeka, Antoine, Mitchell, and attorney Peter Muzinich, during which plaintiff was first informed of Fabrice’s and Antoine’s embezzlement of approximately $10,000.00 which had occurred before plaintiff’s investment and which was never disclosed to plaintiff. (FAC, ¶¶ 20(E)(5), 36.) Madeka was aware of this information before inducing plaintiff to invest money in Hopp but actively concealed it from plaintiff. (Id. at ¶ 20(E)(5).) The embezzlement of money by Fabrice and Antoine was known by everyone in the company. (Id. at ¶ 54.)

On May 19, 2022, Hopp admitted that “from day one” it “did not have any investment to develop the mobile app or website.” (FAC, ¶ 39.) At that time, plaintiff realized that Madeka had lied to plaintiff to induce plaintiff into making the investment so that the Octos Payment could be made instead of using plaintiff’s investment for marketing purposes to procure riders and drivers as had been affirmatively represented to plaintiff. (FAC, ¶ 40.) On June 28, 2022, Fabrice shared the Octos and Reinforce contracts and shareholder agreement with plaintiff. (Id. at ¶ 41.)

In addition, on August 23, 2022, Hopp retained Oniracom to audit Hopp’s app. (FAC, ¶ 46.) Oniracom reported serious security issues with the app and on October 12, 2022, disclosed that the app was not developed to industry standards which could lead to expulsion from app stores and possible exposure to litigation. (Id. at ¶¶ 20(C), 20(E)(9), 46, 49.) These issues were also unknown to plaintiff. (Id. at ¶ 20(C).)

On December 14, 2023, Madeka and Barnes (collectively, moving defendants) jointly filed a special demurrer to the sixth and seventh causes of action alleged in the FAC on the grounds of uncertainty, and a general demurrer to the second and eighth causes of action alleged in the FAC on the grounds that plaintiff has failed to state facts sufficient to constitute a cause of action. (See Demurrer at pp. 3, ll. 3-14 & p. 4, ll. 7-16.)

In support of their joint demurrer, moving defendants submit the declaration of their counsel, Darrell P. White, who declares that on October 9 and 24, 2023, counsel emailed meet and confer correspondence to counsel for plaintiff regarding purported deficiencies in the FAC. (White Decl., ¶ 3 & Exhs. 1 & 4.) On October 10, 2023, counsel requested an extension of time to respond to the FAC which resulted in the parties entering a stipulation to extend the time to respond to the FAC. (Id. at ¶ 3 & Exhs. 2 & 3; see also Oct. 26, 2023, Order [extending deadline for moving defendants to file a responsive pleading].) Plaintiff did not respond to counsel’s meet and confer efforts until the deadline to file a response to the FAC. (Id. at ¶ 3 & Exh. 5.)

Also on December 14, 2023, moving defendants filed a motion to strike paragraphs 57, 62, and 67 of the FAC. In support of the motion to strike, moving defendants submit an identical declaration of their counsel offering the same information further discussed above.

Plaintiff opposes the demurrer and motion to strike.

Analysis:

(1) The Demurrer

In ruling on a demurrer, the court determines whether the complaint states a cause of action. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) The complaint is given a reasonable interpretation and read as a whole, with all its parts in their context. (Ibid.) A demurrer assumes the truth of properly pleaded material allegations, but not of contentions, deductions, or conclusions of fact or law. (Ibid.) The court also accepts as true facts that may be inferred from those expressly alleged and facts appearing in exhibits attached to the complaint. (McMahon v. Craig (2009) 176 Cal.App.4th 1502, 1509; Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 567.) “If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.)

Sufficiency of the meet and confer process:

In the opposition to the demurrer, plaintiff asserts that he filed the FAC in response to a prior meet and confer letter from moving defendants dated June 9, 2023. Plaintiff contends that the FAC addressed moving defendants’ concerns.

Plaintiff further asserts that in a second meet and confer letter dated October 9, 2023, moving defendants for the first time raised concerns with causes of action that were unchanged in the FAC. Plaintiff argues that moving defendants were required to raise objections to the unchanged claims in their original meet and confer letter dated June 9, 2023. Because moving defendants failed to address these claims in that first correspondence, plaintiff argues, the demurrer should be overruled on procedural grounds.

The court has reviewed the meet and confer correspondence attached as Exhibits A and B to the declaration of Michael P. Ring. The October 9, 2023, letter addressing purported deficiencies in the FAC sufficiently complies with the requirements of Code of Civil Procedure section 430.41, subdivision (a)(1). Furthermore, “[a] determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (Code Civ. Proc., § 430.41, (a)(4).) For these reasons, plaintiff’s contention that the demurrer should be overruled on the grounds that the meet and confer process was, according to plaintiff, insufficient is without merit.

Special demurrer to sixth cause of action for recission and restitution and the seventh cause of action for cancellation of the Stock Purchase Agreement:

In the sixth cause of action, plaintiff alleges that the facts asserted in the FAC support recission of the Stock Purchase Agreement under Civil Code section 1689. (FAC, ¶¶ 78, 79.) Plaintiff further alleges that on April 22, 2022, he gave notice of his recission of the Stock Purchase Agreement and offered to return the shares of Hopp stock on condition that plaintiff’s investment of $300,00 was returned, but that defendants refused to return plaintiff’s investment. (Id. at ¶¶ 80, 81.)

In the seventh cause of action for cancellation of instrument, plaintiff alleges that based on fraud in its inducement, plaintiff is “entitled to have the [Stock Purchase Agreement] adjudged void or voidable and cancelled, pursuant to [Civil Code section] 3412.” (FAC, ¶¶ 84, 85.)

Moving defendants contend that the sixth and seventh causes of action are vague and uncertain regarding the identity of the parties to the Stock Purchase Agreement, a copy of which is not attached to the FAC. Moving defendants also contend that because plaintiff alleges that he wired the payment to Hopp and not to moving defendants, it is unlikely that moving defendants are parties to the Stock Purchase Agreement. For this reason, moving defendants argue that the allegations of the FAC show that the parties to the Stock Purchase Agreement are plaintiff and Hopp only and that the seventh cause of action is uncertain.

A party may object by special demurrer on the grounds that the subject pleading is uncertain. (Code Civ. Proc., § 430.10, subd. (f).) “ ‘[U]ncertain’ includes ambiguous and unintelligible.” (Smith v. Kern County Land Co. (1958) 51 Cal.2d 205, 209.) “A special demurrer on the ground that [a pleading] is (a) ambiguous, (b) unintelligible, or (c) uncertain is insufficient unless the demurrer points out specifically wherein the pleading is ambiguous, uncertain or unintelligible.” (Coons v. Thompson (1946) 75 Cal.App.2d 687, 690.)

Moving defendants’ recitation of facts in the demurrer with respect to the alleged parties to the Stock Purchase Agreement demonstrates that the FAC is not unintelligible or ambiguous and that moving defendants understand the issues and the nature of the claims alleged by plaintiff. (See Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245 [“a plaintiff is required only to set forth the essential facts of his case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action”]; Dumm v. Pacific Valves (1956) 146 Cal.App.2d 792, 799.) For this reason, the FAC is not so incomprehensible that moving defendants cannot reasonably respond. (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292.)

Furthermore, the parties to the Stock Purchase Agreement are presumptively within the knowledge of moving defendants. (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822 [demurrer for uncertainty should be overruled when uncertain facts are within defendant’s knowledge].) To the extent the FAC is in some respects uncertain with respect to the identity of the contracting parties, any “ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616 (Khoury).)

In addition, Civil Code section 1689 sets forth the grounds on which a party to a contract may rescind the contract. (See Civ. Code, § 1689, subd. (b)(1)-(7).) Civil Code section 3412 sets forth specific relief of cancellation of a written instrument “in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable”, which is available upon application of a party. (Civ. Code, § 3412.)

Notwithstanding that plaintiff has titled the relief sought in the sixth and seventh counts as causes of action, rescission and cancellation under Civil Code sections 1689 and 3412 are equitable remedies. (Cameron v. Evans Securities Corp. (1931) 119 Cal.App. 164, 172 [recission]; Corrigan v. Stiltz (1965) 233 Cal.App.2d 381, 387 [cancellation].) A motion to strike is the appropriate procedure to attack a remedy demanded in a complaint. To the extent moving defendants’ demurrer challenges plaintiffs’ ability to allege or establish whether plaintiff is entitled to the equitable remedy of recission or cancellation of the purported contract as against moving defendants, it cannot be rightfully sustained. (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) Moreover, as plaintiff seeks equitable remedies under the sixth and seventh causes of action alleged in the FAC, the identity of the parties to the Stock Purchase Agreement is not necessarily dispositive of these claims. (See Khoury, supra, 14 Cal.App.4th at p. 616.)

For all reasons discussed above, the court will overrule the special demurrer of moving defendants to the sixth and seventh causes of action alleged in the FAC.

General demurrer to the second cause of action for civil conspiracy to defraud:

In the second cause of action, plaintiff alleges that moving defendants acted in concert to support a common purpose and interest to defraud plaintiff and cause plaintiff to enter into the Stock Purchase Agreement. (FAC, ¶ 59.) Plaintiff further alleges that each defendant understood that the other defendants shared in that common purpose, and that each committed at least one overt act in furtherance of the common effort to mislead and conceal from plaintiff the true purpose for acquiring plaintiff’s funding of the Stock Purchase Agreement, which was to facilitate the payment of undisclosed debt to senior officials of Hopp, including Madeka. (Id. at ¶¶ 60, 61.)

Moving defendants contend that there exist no specific allegations as to Barnes which demonstrate an overt act by Barnes in furtherance of a conspiracy or common design. For this reason, moving defendants argue, the FAC fails to allege facts or specific acts to sufficient to state a cause of action for conspiracy against Barnes.

“Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration. [Citation.] By participation in a civil conspiracy, a coconspirator effectively adopts as his or her own the torts of other coconspirators within the ambit of the conspiracy. [Citation.] In this way, a coconspirator incurs tort liability co-equal with the immediate tortfeasors.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511 (Applied Equipment).)

In the FAC, plaintiff expressly alleges that, as part of moving defendants’ scheme to induce plaintiff to invest in Hopp, Madeka introduced plaintiff to Barnes on December 12, 2021. (FAC, ¶ 13.) Madeka also included Barnes on emails Madeka sent to plaintiff. (FAC, ¶ 13.) Plaintiff invested because of the inclusion of Barnes, who acted as a promoter for Hopp. (FAC, ¶¶ 7, 13.) Plaintiff further alleges that he became interested in making an investment in Hopp after speaking to Madeka and Barnes. (FAC, ¶ 39.)

Plaintiff also alleges that, with respect to the purportedly false representations and purportedly fraudulent conduct alleged in the FAC, Madeka acted on behalf of herself and Barnes, and that plaintiff relied on the representations and omissions made by Madeka while Madeka was acting on behalf of Barnes. (See, e.g., FAC, ¶¶ 12, 16, 17, 20(A)-(E), 24, 31, 40.) Plaintiff further asserts that Barnes knew there was a substantial amount of debt owed to companies that were owned by or affiliated with both moving defendants and which would be paid with plaintiff’s investment, but that Barnes did not disclose this information plaintiff as part of the common or collective effort by defendants to induce plaintiff to invest in Hopp. (FAC, ¶¶ 27, 50.)

Giving the complaint a reasonable interpretation and accepting the truth of its allegations, plaintiff has alleged facts sufficient to show that Barnes participated in and shared a common plan or design with Madeka and other defendants to perpetrate the alleged fraud on plaintiff for the purpose of inducing plaintiff to invest in Hopp, and not simply a “bare agreement” to harm plaintiff. (See Applied Equipment, supra, 7 Cal.4th at p. 511.) Further, these allegations are sufficient notwithstanding whether there exist express allegations that Barnes was a direct actor. (Ibid.) In addition, apart from citing general legal principles regarding the requirements for pleading a cause of action for fraud, moving defendants offer no reasoned legal or factual argument to demonstrate that acts allegedly performed by Madeka are insufficient to show the commission of a tort for which tort liability co-equal with Madeka may be incurred by Barnes. (Ibid.)

The allegations further discussed above are also sufficient to show Barnes’ cooperation or agreement to cooperate in the allegedly overt acts of Madeka. (See Michael R. v. Jeffrey B. (1984) 158 Cal.App.3d 1059, 1069 [the “gist” of a conspiracy claim is the agreement to commit the unlawful act where as the “gist” of the tort is the damage resulting from overt acts pursuant to the common design].) Moreover, Barnes’ knowledge and intent can be inferred from express allegations regarding the nature of the overt acts done by Madeka (and in some instances, Barnes) and the alleged common interest shared by Barnes, which are also sufficient to allege “tacit consent” by Barnes. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785 [also noting that officers of a corporation may become personally liable to the extent the officer participates or authorizes the tortious conduct].)

For all reasons discussed above, plaintiff has alleged facts sufficient to state a claim for civil conspiracy against moving defendants regardless of whether Barnes is alleged to have acted directly or the degree of the alleged activity by Barnes asserted in the FAC. For present purposes, the court does not consider whether or not plaintiff can prove these allegations. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.) Therefore, the court will overrule the demurrer of moving defendants to the second cause of action alleged in the FAC.

Demurrer to the eighth cause of action for aiding and abetting:

Moving defendants generally assert as grounds for the demurrer to the eighth cause of action, that “ ‘[t]o be held liable as a cotortfeasor, a defendant must have knowledge and intent….A defendant can be held liable as a cotortfeasor on the basis of acting in concert only if he or she knew that a tort had been, or was to be, committed, and acted with the intent of facilitating the commission of that tort.’ ” (Demurrer at p. 11, ll. 19-23, citing Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 407-1138, 1146.)

A memorandum filed in support of a motion must include “a concise statement of the law, evidence and arguments relied on, and a discussion of the statutes, cases, and textbooks cited in support of the position advanced.” (Cal. Rules of Court, rule 3.1113(b).) “In general, the moving party must carry the initial burden of informing its opponent and the court of the specific basis for its motion.” (People v. Williams (1999) 20 Cal.4th 119, 129.) The court may construe the absence of a proper memorandum as an admission that the motion is not meritorious and deny the motion on that basis. (Cal. Rules of Court, rule 3.1113(a).)

Wholly absent from the memorandum in support of the demurrer to the eighth cause of action is any reasoned factual or legal argument demonstrating that the FAC fails to state facts sufficient to constitute a cause of action for aiding and abetting. It is also unclear whether moving defendants contend the eighth cause of action fails as to Madeka and Barnes individually or jointly and why. For these reasons, moving defendants have failed to carry their initial burden. Therefore, the court will overrule the demurrer to the eighth cause of action alleged in the FAC.

(2) The Motion to Strike

Moving defendants request that the court strike paragraphs 57, 62, and 67 of the FAC, which each include claims for exemplary or punitive damages.

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof[.]” (Code Civ. Proc., § 435, subd. (b)(1).) In ruling on a motion to strike, a court may “strike out any irrelevant, false, or improper matter inserted in any pleading” or “strike  all or part of any pleading not filed in conformity with applicable law, court rules, or an order of the court” (Code Civ. Proc., §436.) The grounds for a motion to strike must appear on the face of the pleading or from matters which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

There exist procedural problems with the motion to strike. A notice of a motion “must be in writing, and the notice of a motion, other than for a new trial, must state when, and the grounds upon which it will be made, and the papers, if any, upon which it is to be based.” (Code Civ. Proc., § 1010; see also Cal. Rules of Court, rule 3.1110(a) [“[a] notice of motion must state in the opening paragraph the nature of the order being sought and the grounds for issuance of the order”].)

“The purpose of the notice requirements ‘is to cause the moving party to “sufficiently define the issues for the information and attention of the adverse party and the court.” ’ [Citations.]” (Kinda v. Carpenter (2016) 247 Cal.App.4th 1268, 1277.) Therefore, “[a]s a general rule, the trial court may consider only the grounds stated in the notice of motion.” (Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1125 [also stating that a trial court is not required to consider grounds for relief not raised or sought by the moving party].)

In the memorandum supporting the motion to strike, moving defendants contend that plaintiff has failed to allege facts demonstrating that moving defendants engaged in despicable conduct. However, these grounds are not stated in the notice of the motion to strike. The court is therefore not required to consider these grounds for relief and may deny the motion on procedural grounds.

Notwithstanding the procedural problems further discussed above, to survive a motion to strike allegations of punitive damages, ultimate facts showing an entitlement to such relief must be pleaded. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) The facts and circumstances constituting the claim for punitive damages must be set forth “with sufficient particularity to apprise the opposite party of what he is called on to answer, and to enable the court to determine whether, on the facts pleaded, there is any foundation [for the claim].” (Lehto v. Underground Construction Company (1977) 69 Cal.App.3d 933, 944.)

Under Civil Code section 3294, subdivision (a), punitive damages are recoverable where it is shown by clear and convincing evidence that the defendant acted with malice, oppression, or fraud. “Malice” means “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “Oppression” means “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code, § 3294, subd. (c)(2).) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (Civ. Code, § 3294, subd. (c)(3).)

Though moving defendants address only the allegations appearing in paragraphs 57, 62, and 67 of the FAC, and whether the FAC alleges facts sufficient to show despicable conduct by moving defendants, plaintiff has alleged a cause of action for fraud. Moving defendants offer no reasoned legal or factual argument establishing that plaintiff has failed to allege an entitlement to punitive damages in connection with the cause of action for fraud, or why the express allegations of the FAC further discussed above are insufficient to state a cause of action for fraud.

For all reasons discussed above, moving defendants have failed to meet their burden to persuade the court that there exists improper matter that should be stricken from the FAC or that the FAC is not drawn in conformity with applicable law. (See Code Civ. Proc., § 436; Evid. Code, § 500; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 [“a party who seeks a court’s action in his favor bears the burden of persuasion thereon”].) Therefore, the court will deny moving defendants’ motion to strike paragraphs 57, 62, and 67 of the FAC.