Bui Simon etc. v . Angela Scott, et al.

Case Number

23CV02376

Case Type

Hearing Date / Time

Wed, 11/06/2024 - 10:00

Nature of Proceedings

(4) Motions

Tentative Ruling

HEARINGS

(1)                   Motion of Defendant Angela Scott for Summary Judgment or Alternatively for Summary Adjudication

(2)                   Motion of Defendants Scott Milden and Milden, LLC, for Summary Judgment or Alternatively for Summary Adjudication

(3)                   Motion of Defendants to Seal Exhibits re Motion for Summary Judgment

(4)                   Motion of Defendant Scott Milden to Seal Exhibits re Motion for Protective Order

ATTORNEYS

For Plaintiff Bui Simon, derivatively on behalf of Office of Angela Scott LLC: 

Patricia L. Glaser, Cynthia E. Organ, Alexander R. Miller, Glaser Weil Fink

Howard Jordan & Shapiro LLP

 

For Defendants Angela Scott, Scott Milden, and Milden, LLC: Bert H. Deixler,

Patrick J. Somers, David T. Freenock, Kendall Brill & Kelly LLP

        

RULING

(1)     For the reasons set forth herein, the Motion of Defendant Angela Scott for Summary Judgment or Alternatively for Summary Adjudication is denied in its entirety.

(2)     For the reasons set forth herein, the Motion of Defendants Scott Milden and Milden, LLC, for Summary Judgment or Alternatively for Summary Adjudication is denied in its entirety.

(3)     For the reasons set forth herein, the motion of Defendants Angela Scott, Scott Milden, and Milden, LLC, to Seal Exhibits, Filed on August 16, 2024, is granted. The following documents now lodged provisionally under seal, lodged on August 19, 2024, are ordered filed under seal: (1) Defendant Angela Scott’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 1 of 5]; (2) Defendant Angela Scott’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 2 of 5]; (3) Defendant Angela Scott’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 3 of 5]; (4) Defendant Angela Scott’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 4 of 5]; (5) Defendant Angela Scott’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 5 of 5]; (6) Defendant Scott Milden’s and Milden, LLC’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 1 of 5]; (6) Defendant Scott Milden’s and Milden, LLC’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 1 of 5]; (7) Defendant Scott Milden’s and Milden, LLC’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 2 of 5]; (8) Defendant Scott Milden’s and Milden, LLC’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 3 of 5]; (9) Defendant Scott Milden’s and Milden, LLC’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 4 of 5]; and (10) Defendant Scott Milden’s and Milden, LLC’s Appendix of Evidence in Support of Motion for Summary Judgment or in the Alternative, Summary Adjudication [Volume 5 of 5]. (Note: This motion was filed twice, on August 16 and on August 19, and erroneously appears as two motions on the Court’s docket.)

(4)     For the reasons set forth herein, the motion of Defendant Scott Milden to seal exhibits, filed on August 21, 2024, is granted. The following documents now lodged provisionally under seal, lodged on August 21, 2024, are ordered filed under seal: (1) Supplemental Declaration of Scott Milden in Support of Reply in Support of Motion For Protective Order; and (2) Supplemental Declaration of Angela Scott in Support of Reply in Support of Motion For Protective Order.

Background

(Note: This case is related to Simon v. Scott, case number 23CV03184, in which two motions for summary judgment/ summary adjudicating are also set for this hearing.)

(1)       Allegations of First Amended Complaint

“It is well established that the pleadings determine the scope of relevant issues on a summary judgment motion.” (Nieto v. Blue Shield of California Life & Health Ins. Co. (2010) 181 Cal.App.4th 60, 74.) It is therefore useful to summarize the allegations in the operative pleading, Plaintiff’s first amended complaint (FAC):

Plaintiff Bui Simon (Simon) is a founder and 50 percent owner/ member of The Office of Angela Scott LLC (TOOAS or Company). (FAC, ¶¶ 14, 18.) Defendant Angela Scott (Scott) is the other 50 percent owner/ member of TOOAS. (FAC, ¶¶ 15, 18.) Scott was appointed as the original manager of TOOAS. (FAC, exhibit A, § 4.2.) Nominal Defendant TOOAS is a Texas limited liability company, formed on October 4, 2010, that is now headquartered and operated in Santa Barbara. (FAC, ¶ 32.) On August 3, 2015, Simon and Scott entered into a Restated Operating Agreement (Operating Agreement) for TOOAS, which is the current operating agreement for the Company. (FAC, ¶ 35 & exhibit A.)

The Operating Agreement includes the following provisions (underscoring omitted):

“1.2     Term. The term of the Company commenced on October 4, 2010, the date on which the Certificate of Formation (‘Certificate’) was filed with the Texas Secretary of State, and shall continue until terminated under Section 9.1.”

“1.4     Business of the Company. Notwithstanding the purpose of the Company which is described in the Certificate, the Company shall not engage in any business other than the following without the approval of all of the Members:

            “(a)      The business of designing, licensing, manufacturing and selling footwear; and

            “(b)      Such other activities incidental to the foregoing business, including, but not limited to, the designing, licensing, manufacturing and selling of apparel, handbags and related fashion accessories.”

“3.5     Payments to Members. Except as specified in this Agreement or pursuant to a transaction permitted by Section 4.7, no Member, Manager, or person or entity controlled by, controlling or under common control with the Member or Manager, or person who is an officer, director, partner or trustee of the Member (each such person or entity is defined as an ‘Affiliate’), is entitled to remuneration for services rendered or goods provided to the Company. However, the Company shall reimburse the Members, Managers and their Affiliates for organizational expenses (including, without limitation, legal and accounting fees and costs) incurred to form the Company, prepare the Articles and this Agreement and, as approved by the Managers, for the actual cost of goods and materials used by the Company.”

“4.2     Appointment and Removal of Managers. The initial Manager or Managers of the Company shall be appointed with the approval of all of the Members and each such Manager shall serve until the earlier of (i) such Manager’s resignation, retirement, death or permanent disability; (ii) such Manager ceasing to be an individual Member or an individual then serving as an officer, manager, director, partner, trustee or other controlling person of a Member which is not an individual; or (iii) such Manager’s removal for cause by the Members. The Members initially appoint Angela Marie Scott as the sole Manager. A Manager may be removed with cause at any time upon the approval of the Members excluding, however, any Voting Interest held by the Manager to be removed for cause. For the purpose of this section, ‘cause’ shall mean the gross negligence or willful misconduct of such Manager in the performance of his or her obligations under this Agreement. If such Manager is also a Member, such removal for cause shall not affect the Manager’s rights as a Member except as provided in this section 4.2 or constitute a withdrawal of a Member. Upon a Manager’s removal for cause by the Members, a new Manager shall be appointed by the approval of the Members excluding, however, any Voting Interest held by the Manager removed for cause. Upon a Manager’s resignation, retirement, death or disability, a new Manager shall be appointed by a majority of the remaining Managers or the sole remaining Manager, as the case may be, or if there is no remaining Manager, by the approval of all of the Members.”

“4.3.    Management and Powers. Except as provided by Section 4.4 below, the Managers shall have full, complete and exclusive authority, power, and discretion to manage and control the business, property, and affairs of the Company, to make all decisions regarding those matters, and to perform any and all other acts or activities customary or incident to the management of the Company’s business,

property, and affairs, subject in all cases to the other provisions of this Agreement and the requirements of applicable law.”

“4.4     Limitations on Power of Managers. No Manager shall have authority to (i) do any act in contravention of this Agreement, (ii) do any act which would make it impossible to carry on the ordinary business of the Company, or (iii) confess a judgment against the Company. Additionally, no Manager shall have authority to cause the Company to engage in the following transactions without first obtaining the approval of all of the Members:

            “A.       The sale, exchange or other disposition of all, or substantially all of the properties or assets of the Company.

            “B.       The hypothecation or encumbrance of any of the properties

or assets of the Company.

            “C.       The merger of the Company with or the acquisition by the Company of the assets of another limited liability company, general partnership, limited partnership, corporation or other entity.

            “D.       The hiring of employees, accountants and attorneys for the

Company.

            “E.       An alteration of the authorized business of the Company as

set forth in Section 1.4.”

“4.5     Devotion of Time; Compensation. So long as she is a Manager, Angela shall devote full business time to the business and affairs of the Company. Each other Manager shall devote whatever time or effort as such Manager deems appropriate for the furtherance of the Company’s business. Each Manager shall be entitled to compensation for such Manager’s services to the Company as shall be determined by the approval of all of the Members, and to reimbursement for all expenses reasonably incurred by such Manager in the performance of such Manager’s duties under this Agreement.”

“11.6   Amendments. All amendments to this Agreement shall be in writing and signed by all of the Members in order to be valid.”

“11.8   Governing Law. Except as otherwise specified in this Agreement, the parties hereto agree that for as long as Bui is a Member, the laws of the State of California concerning contracts entered into and to be performed wholly within California between residents of California shall govern the validity of this Agreement, the interpretation and enforcement of its terms, and the rights and duties of the parties hereto (whether a cause of action is asserted in contract, in tort, or otherwise).”

In the fall of 2022, Scott approached Simon requesting a $500,000 bonus to make a down payment on a house. (FAC, ¶ 43.) Simon agreed to review the Company’s finances to see if the Company was in a financial position to pay such a bonus. (Ibid.) Instead, Simon discovered that Scott had embezzled more than $2.5 million in undisclosed compensation and personal expenditures in violation of the Operating Agreement. (Ibid.)

For example, as a result of Simon’s investigation, Simon discovered that the Company has been making substantial payments for multiple Porsches being driven by Scott during the years 2015 through 2023 primarily for personal purposes. (FAC, ¶¶ 44-46.) The payment of these expenses with Company funds was never approved by Simon. (Ibid.) Scott used Company funds to pay for unauthorized personal expenses, including retail shopping and personal trips. (FAC, ¶¶ 47, 48.)

Defendant Scott Milden (Milden) is Defendant Scott’s husband. (FAC, ¶ 1.) Defendant Milden, LLC (Milden LLC) is a California limited liability company with Milden as its sole member and manager. (FAC, ¶ 17.) Milden was given multiple Company credit cards by Scott that were used for improper personal expenses. (FAC, ¶ 50.) Simon has identified more than $1 million in payments to Milden. (FAC, ¶ 57.) Milden was paid as an employee of the Company without the approval of Simon. (FAC, ¶¶ 57, 58.) Improper payments were also made to Milden LLC. (FAC, ¶¶ 59-60.)

On July 19, 2023, Simon took the step of removing Scott as manager of the Company “for cause” under the Operating Agreement. (FAC, ¶¶ 69-72.) Simon then appointed Gene Montesano as Manager. (FAC, ¶ 72.) Montesano was succeeded by Todd Steele. (FAC, ¶ 82.) Scott has disputed whether she has been legally removed as manager. (FAC, ¶¶ 74-76, 83.)

(2)       Procedural History

On June 2, 2023, Simon filed the original complaint in this action. Pursuant to the stipulation of the parties and order of the Court, Simon filed the operative pleading, the FAC, on September 12, 2023. The FAC asserts 16 causes of action: (1) declaratory relief; (2) breach of fiduciary duty; (3) aiding and abetting breach of fiduciary duty; (4) waste of corporate assets; (5) fraud; (6) aiding and abetting fraud; (7) conversion; (8) violation of Penal Code section 496; (9) third-party beneficiary breach of contract; (10) third-party beneficiary breach of the covenant of good faith and fair dealing; (11) inducing breach of contract; (12) intentional interference with contractual relations; (13) money had and received; (14) accounting; (15) restitution from unjust enrichment; and (16) injunctive relief. These claims are all asserted by Simon as a derivative action for the benefit of nominal Defendant TOOAS. (FAC, ¶¶ 22-26.)

On October 12, 2023, Defendants Scott, Milden, and Milden LLC (collectively, Defendants) filed their answer to the FAC, generally denying the allegations thereof and asserting 32 affirmative defenses.

On August 16, 2024, Defendants filed their motion to seal copies of exhibits 7 through 10, 18 through 22, 24, 28, 29, 33, 35 through 48, 50, 55, 60 through 65, 67, 69 through 72, and 82 through 88 then to be filed in support of their respective motions for summary judgment. Hearing on this motion was set for October 30, 2024, and was continued from that hearing to his hearing. The same motion was apparently re-filed with the lodged exhibits on August 19 and set for November 6. No opposition was filed to this motion either as filed or as re-filed.

On August 19, 2024, Defendant Scott filed her motion for summary judgment or alternatively for summary adjudication. As discussed below, the motion is opposed by Simon.

Also on August 19, 2024, Defendants Milden and Milden LLC (collectively, the Milden Defendants) filed their motion for summary judgment or alternatively for summary adjudication. As discussed below, the motion is opposed by Simon.

On August 21, 2024, Defendant Scott Milden filed his motion to seal exhibits to the supplemental declarations of Scott Milden and Angela Scott lodged under seal on August 21, in support of their reply in support of motion for protective order that was heard on August 28. No opposition to this motion has been filed.

Analysis

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., § 437c, subd. (a)(1).)

“A cause of action has no merit if either of the following exists: [¶] (1) One or more of the elements of the cause of action cannot be separately established, even if that element is separately pleaded. [¶] (2) A Defendant establishes an affirmative defense to that cause of action.” (Code Civ. Proc., § 437c, subd. (o).)

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more Defendants either owed or did not owe a duty to the Plaintiff or Plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the Court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the Court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the Court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)

“For purposes of motions for summary judgment and summary adjudication: [¶] … [¶] (2) A Defendant … has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the Defendant … has met that burden, the burden shifts to the Plaintiff … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The Plaintiff … shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).)

There is no obligation of the opposing party to establish anything by affidavit unless and until the moving party has by affidavit stated facts establishing every element necessary to sustain a judgment in his or her favor. (Consumer Cause, Inc. v. Smilecare (2001) 91 Cal.App.4th 454, 468.)

The Court notes that, as previously observed in these proceedings, TOOAS is alleged to be a Texas limited liability company. (FAC, ¶ 18.) In support of and in opposition to these motions, both parties cite California law (either by California Courts or federal Courts applying California law) exclusively. “As the forum state, California will apply its own law ‘unless a party litigant timely invokes the law of a foreign state.’ [Citations.]” (Chen v. Los Angeles Truck Centers, LLC (2019) 7 Cal.5th 862, 867.) This Court therefore applies California law throughout.

(1)       Motion of Defendant Scott for Summary Judgment/ Summary Adjudication

            (A)       Procedural Matters

Defendant Scott’s memorandum in support of the motion exceeds the page limits. “In a summary judgment or summary adjudication motion, no opening or responding memorandum may exceed 20 pages. … The page limit does not include the caption page, the notice of motion and motion, exhibits, declarations, attachments, the table of contents, the table of authorities, or the proof of service.” (Cal. Rules of Court, rule 3.1113(d).) Here, the memorandum in support commences on page 10 and concludes on page 34, for a total of 25 pages. No application was made to file an oversized memorandum (See Cal. Rules of Court, rule 3.1113(e).) “A memorandum that exceeds the page limits of these rules must be filed and considered in the same manner as a late-filed paper.” (Cal. Rules of Court, rule 3.1113(g).) The Court will consider the memorandum in support of the motion, but reminds counsel of their obligation to follow all applicable rules.

In reply, Scott objects to the expert declaration and report of Irwin Nachimson relying specifically upon the Court’s discovery ruling on October 30, 2024, that certain spreadsheets were protected by the mediation privilege of Evidence Code section 1119. Scott argues further that because Nachimson relied on information contained in those spreadsheets, Nachimson’s expert opinions are inadmissible under Evidence Code section 801. Scott’s objections are overruled as discussed herein.

It is important to point out that Scott misconstrues the Court’s discovery ruling in arguing that Nachimson’s expert opinions would be inadmissible because the spreadsheets are subject to the mediation privilege. In the discovery matter, the Court found that the spreadsheets at issue, i.e., those specific documents, were prepared for the mediation, circulated among the parties as part of the mediation, and provided to the mediator. The Court therefore determined that it was improper to ask questions in deposition about those specific documents. The Court went on to emphasize that the underlying information was not subject to the mediation privilege:

“[T]he fact that communications were made during the mediation and writings prepared for use in the mediation that are inadmissible and not subject to compulsory production does not mean that the underlying data, not otherwise privileged, is also immune from production. [Citations.] [A Defendant’s] payroll records, for example, if relevant to the quantification of the claims being settled, are subject to discovery and may be introduced in opposition to the settlement even if they were disclosed to class counsel during the mediation, and even if class counsel was shown only a summary or analysis of those records that is not itself subject to production because prepared for use in the mediation.” (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 132; see also Evid. Code, § 1120, subd. (a).)

Nachimson’s opinions may rely upon the underlying data, regardless of whether that data was summarized in the spreadsheets that are, as documents, protected by the mediation privilege. Nachimson’s opinions and report based upon the underlying data are not made inadmissible by virtue of the Court’s determinations as to discovery related to the specific spreadsheets previously under discussion.

In any event, as discussed below, the Court does not rely on Nachimson’s expert opinions, or other evidence subject to objection, to reach the rulings stated herein. The Court therefore need not, and does not, rule on other evidentiary objections. (Code Civ. Proc., § 437c, subd. (q).)

            (B)       Breach of Fiduciary Duty

Simon’s second cause of action is for breach of fiduciary duty. Scott asserts that this cause of action is time-barred, that Scott did not breach any duty, or that Simon cannot prove all essential elements. (Notice, at p. 2.)

                        (i)        Statute of Limitations

“The limitations period is three years for a cause of action for deceit [citations], as it is for a cause of action for breach of fiduciary duty where the gravamen of the claim is deceit, rather than the catchall four-year limitations period that would otherwise apply [citation].” (Fuller v. First Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 963; see also Motion, at p. 26, fn. 1.) Simon does not dispute that the three-year limitations period for deceit applies to this cause of action.

This action was initially filed on June 2, 2023. Thus, before any delayed-accrual rules need be applied (to whatever extent applicable), the limitations period extends back at least to June 2, 2020.

“The general rule for defining the accrual of a cause of action sets the date as the time ‘when, under the substantive law, the wrongful act is done,’ or the wrongful result occurs, and the consequent ‘liability arises....’ [Citation.] In other words, it sets the date as the time when the cause of action is complete with all of its elements [citations]—the elements being generically referred to by sets of terms such as ‘wrongdoing’ or ‘wrongful conduct,’ ‘cause’ or ‘causation,’ and ‘harm’ or ‘injury’ [citations].” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.)

The FAC alleges numerous breaches of fiduciary duty by Scott in the nature of separate misappropriation of TOOAS assets. (E.g., FAC, ¶¶ 47-48.) While an argument could be made for applying the continuing accrual rule where the action accrues at the time of the last tortious action—and  the Court need not, and does not, determine that issue now—the claims asserted in the FAC at least imply application of the continuous accrual rule: “Generally speaking, continuous accrual applies whenever there is a continuing or recurring obligation: ‘When an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period.’ [Citation.] Because each new breach of such an obligation provides all the elements of a claim—wrongdoing, harm, and causation [citation]—each may be treated as an independently actionable wrong with its own time limit for recovery.” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1199.)

There is little doubt that each of these alleged misappropriations is separately actionable, that is to say, Simon or TOOAS would have a fully accrued cause of action upon each alleged misappropriation. There is no argument made, and no evidence presented to support, the concept that Simon’s or TOOAS’s failure to bring an action for a single misappropriation in 2015 prevents Simon or TOOAS from bringing an action for a different misappropriation occurring later, or even today, on the basis of the statute of limitations having run from the 2015 incident.

With this in mind, Scott has failed to meet her initial burden on summary adjudication as to this cause of action on the basis of the statute of limitations. Scott has failed to provide evidence that all of the alleged separate misappropriations, i.e., the entirety of the cause of action, occurred prior to the limitations period. Moreover, to whatever extent a specific misappropriation could be considered on its own in this motion, Scott has failed to set forth in her separate statement specific alleged misappropriations that might otherwise be barred. (See Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 173 [facts must be set out in separate statement.)

The motion for summary adjudication will be denied on this ground.

                        (ii)       Substantive Elements

The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage caused by the breach. (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 244.)

“A Defendant who moves for summary judgment has the initial burden of showing each alleged cause of action is without merit. [Citation.] A Defendant can meet this burden by ‘prov[ing] an affirmative defense, disprov[ing] at least one essential element of the Plaintiff’s cause of action [citations], or show[ing] that an element of the cause of action cannot be established.’ [Citations.]” (Severin Mobile Towing, Inc. v. JPMorgan Chase Bank, N.A. (2021) 65 Cal.App.5th 292, 302.) As noted above, Scott asserts that she did not breach any duties and that Simon cannot prove the elements of this cause of action.

With respect to the argument that Simon cannot prove the elements of this cause of action, i.e., showing that an element cannot be established, in order to meet her initial burden, Scott must present evidence of Simon’s inability to prove any element.

“Summary judgment law in this state, however, continues to require a Defendant moving for summary judgment to present evidence, and not simply point out that the Plaintiff does not possess, and cannot reasonably obtain, needed evidence. In this particular at least, it still diverges from federal law. For the Defendant must ‘support [ ]’ the ‘motion’ with evidence including ‘affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice’ must or may ‘be taken.’ [Citation.] The Defendant may, but need not, present evidence that conclusively negates an element of the Plaintiff’s cause of action. The Defendant may also present evidence that the Plaintiff does not possess, and cannot reasonably obtain, needed evidence—as through admissions by the Plaintiff following extensive discovery to the effect that he has discovered nothing. But, … the Defendant must indeed present ‘evidence’: Whereas, under federal law, ‘pointing out through argument’ [citation] may be sufficient [citation], under state law, it is not.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854–855, fns. omitted.)

Scott has presented no separate statement facts demonstrating that Simon cannot prove any breach of duty, that is, that Simon does not have and cannot reasonably obtain needed evidence. Scott therefore fails to meet her initial burden on summary adjudication on this issue.

With respect to Scott’s argument of negating the element of breach, Scott fails to meet her burden on this issue as well.

Scott was the manager of TOOAS. (Scott decl., ¶ 36 & exhibit 32.) “The manager of an LLC has a fiduciary duty and owes to the members of the LLC the same duties of loyalty and good faith as a partner owes to the partnership and its partners. [Citations.] Thus, [the manager] is obligated to act with the utmost loyalty and in the highest good faith when dealing with any member of the LLC …. He may not obtain any advantage over … any other member of the LLC[ ] by even the slightest misrepresentation or concealment.” (Feresi v. The Livery, LLC (2014) 232 Cal.App.4th 419, 425.)

The Operating Agreement provides for compensation to the manager “as shall be determined by the approval of all of the Members, and to reimbursement for all expenses reasonably incurred by such Manager in the performance of such Manager’s duties under this Agreement.” (Scott decl., ¶ 36 & exhibit 32.) The separate statement facts do not include facts by which Simon, the other member, approved of all of the items which Simon alleges constitute improper payments and misappropriations to Scott. The separate statement facts do not include facts by which Scott affirmatively shows that particular alleged payments did not occur. Each alleged improper payment would constitute a breach of fiduciary duty. (See Corp. Code, § 17704.09, subds. (b)(1), (f)(1).) Because Scott has failed to negate each alleged breach of fiduciary duty, Scott has failed to meet her initial burden on summary adjudication on that issue.

In any case, there are numerous triable issues of material fact identified in Scott’s separate statement. As one example, separate statement fact 4 is:

“Soon after Plaintiff Simon agreed to provide a loan to TOOAS, she designated Mark Bernstein, a certified public accountant and partner in Katz Sapper & Miller LLP (‘KSM’), as her agent and instructed Defendant Scott to coordinate the ‘business’ of TOOAS with Mr. Bernstein.”

Separate statement fact 4 is asserted to be supported by the declaration of Defendant Scott and by an email: “Soon after Plaintiff Simon agreed to provide a loan to TOOAS, she designated Mark Bernstein, a certified public accountant and partner in Katz Sapper & Miller LLP (‘KSM’), as her agent and instructed me to coordinate the ‘business’ of TOOAS with Mr. Bernstein. A true and correct copy of an August 2012 email thread among Bui Simon, Mark Bernstein, and me is attached hereto as Exhibit 1.” (Scott decl., ¶ 6, bolding omitted.)

The cited email, from Simon to Scott, dated August 12, 2012, states, in part: “It is very important that you work with Mark on these issues. To keep things creative and spare us the awkwardness of dealing with the ‘business’ of things, I have elicited Mark’s guidance and expertise from the get go. I understand you wanting to get your own outside advice but such responses need to be discuss out of respect for the partnership.

“Let’s speak after you address this with Mark so we will have a clearer understanding going forward.”

The existence of agency is generally a question of fact. (Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th 541, 550.) This email is insufficient to show that Mark Bernstein was designed as Simon’s or TOOAS’s agent, as opposed to merely a consultant. Moreover, to the extent that an inference may be drawn from this email that Bernstein was designated as an agent, that inference is directly disputed by Bernstein and by Simon:

“I was never designated as Plaintiff’s agent in connection with the operation or management of TOOAS, and certainly not in connection with Plaintiff’s rights and duties under the Operating Agreement. Among other things, this means I was never authorized by Plaintiff to approve salaries or compensation for TOOAS personnel, or to approve the hiring of employees or other professionals on behalf of the Company, and I did not provide any such approvals.” (Bernstein decl., ¶ 3.)

In her deposition, Simon testified that Bernstein was her accountant and did not have any other role with respect to TOOAS. (Simon depo., pp. 29-31.)

As another example, separate statement fact 75 is:

“Plaintiff Simon was aware of and consented to Company charitable contributions.

Indeed, Plaintiff Simon first suggested the Company begin charitable giving and

secured a donation to her own purported charity—Angel Wings Foundation. Defendant Scott often discussed charitable giving with Plaintiff Simon.”

Separate statement fact 75 is supported by the declaration of Defendant Scott: “Plaintiff Simon was aware of and consented to Company charitable donations. Indeed, Plaintiff Simon first suggested the Company begin charitable giving and secured several donations to her own purported charity—Angels Wings Foundation. I often discussed charitable giving with Plaintiff Simon.” (Scott decl., ¶ 54.)

Separate statement fact 75 is disputed, including by Simon’s deposition testimony:

“Q        And did you approve the company’s commitment to donate $100,000 for over a ten-year period to female-centric nonprofit organizations such as Walk the Walk challenge?

“A        No, we didn’t talk about that.

“Q        Are you familiar with that organization?

“A        I was not involved with that organization.

“Q        Are you familiar with it?

“A        Not exactly.

“Q        Do you know anything about it?

“A        No.

“Q        What is the ‘not exactly’?

“A        It’s never been discussed with me.” (Simon depo., p. 362 [Organ decl., exhibit 109].)

“ ‘[T]he separate statement effectively concedes the materiality of whatever facts are included. Thus, if a triable issue is raised as to any of the facts in your separate statement, the motion must be denied!’ ” (Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252, quoting Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2009) ¶ 10:95.1, p. 10-35 (rev. # 1, 2009).)

Accordingly, Scott’s motion for summary adjudication is denied as the second cause of action for breach of fiduciary duty.

            (C)       Remaining Causes of Action

Scott’s separate statement for each cause of action, and for summary judgment, sets for the same 138 separate statement facts, including specifically, separate statement facts 4 and 75 discussed above. Thus, whether or not Scott has met her initial burden on summary adjudication as to any other cause of action, there are triable issues of material fact precluding summary adjudication and summary judgment.

Accordingly, Scott’s motion is denied in its entirety.

(2)       Motion of Defendants Milden and Milden LLC for Summary Judgment/ Summary Adjudication

The Milden Defendants similarly move for summary adjudication of each of the causes of action asserted against them. The Milden Defendants’ separate statement in support of summary adjudication for each cause of action, and for summary judgment, sets for the same 138 separate statement facts as set forth in support of Scott’s motion, including specifically, separate statement facts 4 and 75 discussed above. Thus, for the same reasons discussed above, whether or not the Milden Defendants have met their initial burden on summary adjudication as to any cause of action, there are triable issues of material fact precluding summary adjudication and summary judgment.

Accordingly, the Milden Defendants’ motion is denied in its entirety.

(3)       Motions to Seal

Defendants move to seal copies of exhibits 7 through 10, 18 through 22, 24, 28, 29, 33, 35 through 48, 50, 55, 60 through 65, 67, 69 through 72, and 82 through 88.

“The Court may order that a record be filed under seal only if it expressly finds facts that establish:

            “(1)      There exists an overriding interest that overcomes the right of public access to the record;

            “(2)      The overriding interest supports sealing the record;

            “(3)      A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;

            “(4)      The proposed sealing is narrowly tailored; and

            “(5)      No less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d).)

The Court has reviewed the exhibits that are subject to this motion. (See also Somers decl. re sealing, ¶¶ 3-4.) The Court finds: The exhibits contain sensitive financial information of TOOAS, which constitutes an overriding interest that overcomes the right of public access to these exhibits. The overriding interest supports sealing these exhibits. If the exhibits are not sealed, there is a substantial probability that TOOAS’s interests in maintaining confidential the sensitive financial information will be prejudiced. The proposed sealing is narrowly tailored as applicable only to the exhibits containing the sensitive financial information. The public redacted versions of the entire exhibits redact only those exhibits subject to this motion. There is no less restrictive means to achieve the overriding interest. The motion to seal will therefore be granted.

Defendant Milden also moves to file under seal exhibits F through L of the supplemental declaration of Scott Milden and exhibits M, O, S, and T of the supplemental declaration of Angela Scott, both provisionally lodged under seal on August 21, 2024.

The Court has reviewed the exhibits that are subject to this motion. (See also Somers decl. re sealing, ¶¶ 3-4.) The Court finds: The exhibits contain sensitive financial information of TOOAS, which constitutes an overriding interest that overcomes the right of public access to these exhibits. The overriding interest supports sealing these exhibits. If the exhibits are not sealed, there is a substantial probability that TOOAS’s interests in maintaining confidential the sensitive financial information will be prejudiced. The proposed sealing is narrowly tailored as applicable only to the exhibits containing the sensitive financial information. The public redacted versions of the entire exhibits redact only those exhibits subject to this motion. There is no less restrictive means to achieve the overriding interest. The motion to seal will therefore be granted.

 

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