Rajeev Chitrabhanu v. Richard Dean Carson, et al
Rajeev Chitrabhanu v. Richard Dean Carson, et al
Case Number
23CV05200
Case Type
Hearing Date / Time
Wed, 03/19/2025 - 10:00
Nature of Proceedings
1) Motion for Summary Judgment; 2) Joinder for Summary Judgment; and, 3) Motion for Summary Adjudication
Tentative Ruling
For Plaintiff and Cross-Defendant Rajeev Chitrabhanu: Jeremy Ostrander, Jack E. Pace III, Balaji Venkatakrishnan, Megan Scime, White & Case LLP; Nathan Rogers, Rogers, Sheffield & Campbell, LLP
For Defendant Richard Dean Carson: J. Paul Gignac, Excello Law U.S. LLP
For Defendant and Cross-Complainant ProHealth, Inc.: Nick S. Pujji, Emma Moralyan, Jacqueline M. Whipple, Dentons US LLP
RULING
(1) For the reasons set forth herein, the motion of defendant ProHealth, Inc., for summary judgment, or alternatively for summary adjudication, and joined by defendant Richard Dean Carson is denied in its entirety.
(2) For the reasons set forth herein, the motion of plaintiff Rajeev Chitrabhanu for summary adjudication is denied.
(3) The trial date of April 9, 2025 is confirmed. Complaint filed 11/2023; this is a jury trial; days reserved after the Pretrial Conference on 4/9/25 at 11:30 am; 4/10; 4/11; 4/14; 4/15; 4/17; 4/18; 4/21; 4/22; 4/24; 4/25 = 10 days; all trial documents including customized jury instructions and jury verdict form, witness and exhibit list; trial briefs and in limine motions are due 4/2/25.
Background
(1) Procedural History
On November 21, 2023, plaintiff Rajeev Chitrabhanu filed a complaint against defendants ProHealth Inc. (ProHealth) and Richard Dean Carson, in his personal capacity as the Chairman of ProHealth (Carson) (collectively, defendants), alleging seven causes of action: (1) breach of contract; (2) anticipatory breach of contract; (3) quantum meruit; (4) fraud; (5) negligent misrepresentation; (6) breach of fiduciary duty; (7) accounting.
On January 12, 2024, ProHealth filed a demurrer to the complaint on the grounds that each cause of action alleged in the complaint failed to state facts sufficient to constitute a cause of action and is uncertain. On the same date, ProHealth filed a motion to strike all allegations for punitive damages against ProHealth alleged in the complaint.
Also on January 12, 2024, Carson filed a demurrer to the complaint on the grounds that each cause of action alleged in the complaint failed to state facts sufficient to constitute a cause of action. Carson also filed a joinder in the ProHealth demurrer and motion to strike.
On February 21, 2024, the court sustained the demurrer of ProHealth, with leave to amend, as to the seventh cause of action (accounting), and sustained the demurrer of Carson, with leave to amend, as to the first (breach of contract), second (anticipatory breach of contract), and third (quantum meruit) causes of action, but otherwise overruled the demurrer.
Chitrabhanu did not file an amended complaint notwithstanding leave to do so. On March 25, 2024, Carson filed an answer to the complaint generally denying the allegations thereof and asserting 12 affirmative defenses. On April 8, pursuant to stipulation and order, ProHealth filed an answer to the complaint generally denying the allegations thereof and asserting 33 affirmative defenses. ProHealth concurrently filed a cross-complaint against plaintiff asserting four causes of action: (1) unjust enrichment; (2) breach of contract; (3) fraudulent inducement; and (4) negligent misrepresentation. On May 10, Chitrabhanu, now also as cross-defendant, filed an answer to the cross-complaint generally denying the allegations thereof and asserting 19 affirmative defenses.
On August 28, 2024, Carson filed a motion for judgment on the pleadings asserting that the sixth cause of action failed to allege facts sufficient to state a cause of action, which motion was joined by ProHealth.
On September 25, 2024, the motion for judgment on the pleadings was denied.
On January 10, 2025, the parties stipulated, and the court ordered on that stipulation, that the notice periods for summary judgment motions be shortened.
On February 4, 2025, ProHealth filed its motion for summary judgment. Also on February 4, Carson filed a joinder in ProHealth’s motion. Further on February 4, Chitrabhanu filed his motion for summary adjudication of the first cause of action (breach of contract) of Chitrabhanu’s complaint. All motions are opposed.
On February 24, 2025, Chitrabhanu filed an ex parte application for an order to amend his complaint or alternatively for an order shortening time on such a motion. On February 25, the court denied the ex parte application.
Trial is now set for April 9, 2025.
(2) Allegations of Plaintiff’s Complaint
Chitrabhanu alleges in his complaint:
Plaintiff is a business advisor and entrepreneur who has built a career devising exit strategies for businesses. (Complaint, ¶ 7.) Plaintiff is also the founder of Magnetic, a firm based in Mumbai, India. (Ibid.) Plaintiff is now directing his efforts as an investor and advisor through Magnetic to develop and grow businesses and to place them in a position for a potential sale. (Ibid.)
ProHealth is a corporation located in Carpinteria, California. (Complaint, ¶ 8.) Carson founded ProHealth in 1988 to market nutritional supplement products containing nicotinamide mononucleotide (NMN). (Ibid.) Carson is the owner, shareholder, and Chairman of ProHealth, and has also served as ProHealth’s Chief Financial Officer. (Complaint, ¶ 9.)
ProHealth has struggled to generate revenue for the majority of its history. (Complaint, ¶ 12.) Plaintiff contacted Carson in November 2020 to express excitement for ProHealth and its NMN nutritional supplement products. (Complaint, ¶ 13.) The two men communicated regularly. (Ibid.) At the time, Carson was developing a business venture named ProHealth Longevity with the goal of generating revenue by selling supplement products, including NMN, using ProHealth’s existing network of customers. (Complaint, ¶ 14.)
In late 2020 and early 2021, Carson communicated to plaintiff that he wished to leverage plaintiff’s knowledge and expertise to benefit ProHealth and ProHealth Longevity. (Complaint, ¶ 15.) Defendants solicited plaintiff’s advice on all aspects of ProHealth’s business and operations, including ProHealth’s sales, inventory, finances, marketing, and personnel. (Ibid.) During this period, plaintiff invested time to learn about and counsel defendants regarding ProHealth’s business goals. Carson and plaintiff communicated often and for lengthy periods of time discussing all aspects of ProHealth’s business. (Ibid.)
Carson communicated to plaintiff that he wished to devise an exit strategy with the goal of selling ProHealth and that he wished to use plaintiff’s experience to accomplish that goal. (Complaint, ¶ 15.) Plaintiff told Carson that he would assist with the exit strategy, but that plaintiff’s involvement would be conditioned on plaintiff receiving an upfront equity stake in ProHealth in return. (Ibid.) Plaintiff told defendants that it was his regular practice to enter only into those arrangements that provided plaintiff with equity in the businesses he advised. (Complaint, ¶ 16.) Plaintiff communicated this requirement to defendants in early 2021 and in the spring of 2021. (Ibid.)
In the first half of 2021, defendants told plaintiff on numerous occasions that plaintiff would be compensated for advising defendants by receiving an upfront equity stake in ProHealth. (Complaint, ¶ 17.) Carson also told ProHealth’s Board of Directors that plaintiff would receive an equity stake in ProHealth in exchange for plaintiff’s services. (Ibid.) Defendants and plaintiff ultimately came to an agreement pursuant to which plaintiff would be provided with an upfront equity interest in ProHealth. (Ibid.)
During the summer of 2021, upon defendants’ request to formalize the partnership between the parties, defendants finalized the terms of plaintiff’s ownership in ProHealth. (Complaint, ¶ 19.) On June 28, 2021, plaintiff sent Carson an email titled “Terms of Engagement” (the TOE) stating the terms that plaintiff and defendants had discussed regarding plaintiff’s ownership, equity interest, compensation, and performance obligations in and to ProHealth. (Complaint, ¶ 20.) The TOE itemized the consideration plaintiff would receive from defendants in exchange for plaintiff’s services and stated plaintiff’s performance obligations which defendants and plaintiff had previously discussed. (Ibid.)
Pursuant to the TOE, defendants agreed that plaintiff would receive a $5,000 monthly fee beginning in July 2021, a 10 percent upfront equity share in ProHealth, and a guaranteed 40 percent share of sales proceeds if ProHealth was sold at a valuation above $19 million, which was Carson’s best-case scenario as conveyed at the time to plaintiff. (Complaint, ¶ 20.) For example, if ProHealth was sold at a $25 million valuation, the parties agreed that plaintiff would receive $1.9 million (a 10 percent equity share in ProHealth), plus an additional $2.4 million or 40 percent of the sales proceeds above the $19 million mark. (Ibid.)
On July 24, 2021, Carson sent an email to plaintiff regarding the TOE stating “Your message below is nicely summed up and is exactly what we discussed. Good job.” (Complaint, ¶ 22.) Carson also described plaintiff as his “business partner” to ProHealth’s board of directors, employees, and third-party business contacts, before and after the TOE. (Complaint, ¶ 23.)
Plaintiff performed his obligations pursuant to the TOE. (Complaint, ¶ 23.) To plan for ProHealth’s exit, plaintiff worked to establish a business advisory board which included efforts by plaintiff to identify, find, and recruit qualified individuals to populate the business advisory board because Carson and other members of ProHealth’s management lacked experience with corporate finance, growing businesses, and developing exit strategies. (Complaint, ¶¶ 24-26.) Carson described plaintiff as the “founding member” of ProHealth’s business advisory board. (Complaint, ¶ 25.)
Plaintiff also worked to expand ProHealth into markets in Asia, improved ProHealth’s marketing strategy which resulted in increased sales on Amazon, evaluated ProHealth’s finances, and advised defendants on improving cash flow as well as inventory and personnel management. (Complaint, ¶¶ 27-42.) These efforts included plaintiff negotiating an amicable departure of ProHealth’s former Chief Executive Officer and identifying and hiring a new successor Chief Executive Officer. (Complaint, ¶¶ 47-54.) As a result of plaintiff’s efforts, ProHealth’s revenues increased to greater than $20 million in 2022. (Complaint, ¶ 58.)
From November 2020 through February 2022, plaintiff devoted time and effort to providing advisory and consulting services to defendants in reliance on defendants’ commitment to provide an upfront equity stake in ProHealth to plaintiff in exchange for his services. (Complaint, ¶ 18.) Defendants paid plaintiff the $5,000 monthly fee provided in the TOE from August to December 2021. (Complaint, ¶ 6.)
In late 2021 and early 2022, defendants disavowed and refused to acknowledge the TOE. (Complaint, ¶¶ 59-60.) In April 2022, defendants took the position that the parties never entered into an agreement and, throughout the spring of 2022, defendants disengaged from communications with plaintiff. (Complaint, ¶¶ 60-61.) In late November 2021, Carson proposed to plaintiff that they modify the compensation set out in the TOE from $5,000 per month to an hourly fee of $715. (Complaint, ¶ 62.)
Defendants have not provided plaintiff with any payment or remuneration related to his equity interest in ProHealth, including the 10 percent upfront equity stake to which they agreed in June 2021. (Complaint, ¶¶ 6, 65.) Defendants also refused to acknowledge plaintiff’s right to 40 percent of all sales proceeds in the event ProHealth is sold at a valuation above $19 million. (Complaint, ¶ 6.)
(2) Background Facts in Support of Motion of ProHealth, Inc.
Defendant ProHealth sets forth the following facts in its separate statement filed in support of its motion:
Plaintiff Chitrabhanu claims he and ProHealth formed a valid and enforceable contract via: (a) Plaintiff’s June 28, 2021, email to Defendant Carson and (b) a July 24, 2021, email from Carson to Chitrabhanu. (Plaintiff’s Response Separate Statement [PSS], undisputed fact 1.) (Note: The original text of emails and texts is retained and set forth below without correction for spelling, grammar, or punctuation.)
Chitrabhanu’s original June 28, 2021, email reads:
“From: Rajeev Chitrabhanu …
“Sent: 28 June 2021 08:34
“To: Rich Carson …
“Subject: Terms of Engagement
“Dear Rich,
“As discussed trying to pen down our weeks of discussion in a simple and lucid way so that the commercials are captured and the friendship is preserved at all costs.
“-Expectation of 6-8 hrs per month for strategic discussions need based.
“-building tracking metrics for exit, looking at ___ comparable companies.
“-travel/zoom mtgs for key partnerships,
“-business review,
“-recruitment,
“-board and advisory board construction,
“-Asia planning,
“-negotiations of key partnerships,
“-planning for a strategic partner and or an exit and negotiating the exit.
“-At all times looking after the business and economic interest of Mr. Richard Carson.
“Terms Discussed:
“Monthly Cash - $5000 starting from the beginning of July 2021. We can increase if the companies [sic] profits improves next year. We can reduce if the profit reduces.
“Equity – 10 % equity to be given upfront.
“Profit share above 19M (increased from 17M) – 60% to Richard [sic] and 40% to Rajeev.
“{That means till 19 M, Richard gets 90%}
“Illustration 1
“if the company was sold at $25Mn
“Rich would get (17.1 + 3.6= 20.7)
“Rajeev would get (1.9+ 2.4 = 4.3 )
“Illustration 2:
“If the company was sold at 35Mn
“Rich would get 20.7 + 6 = 26.7
“Rajeev would get 4.3 + 4 = 8.3
“Illustration 3:
“Worst case, if the company was sold at $ 19M,
“Rich would get 17.1
“Rajeev would get 1.9
“If after 18 months you feel that the above areas are not being catered too or if I feel it’s not with the time invested, and the company is moving in a different direction we will amicably discuss the profit share reduction or waiver.
“Please confirm at our understanding is the same.
“Warm Regards,
“Rajeev” (PSS, undisputed fact 2; Moralyan decl., exhibit B, pp. 31-34.)
Carson responded to this email by an email of the same date:
“From: Rich Carson …
“Sent: Monday, June 28, 2021 9:21:25 AM
“To: Rajeev Chitrabhanu …
“Subject: Re: Terms of Engagement
“Hi Rajeev, I appreciate the time it took for you to memorialize all our ideas. I agree with almost everything you mention, (but it would’ve been more fun it you would’ve use some bigger numbers in the sales price example category—$100,000 for example..[smiley emoji with teeth]
“I see that you added in a 10% [¶] ownership stake upfront, before the company hits a market value of $17 million, (after fees) to the owner. I believe you gave me an extra $2 million to compensate, bringing the market value to 19 million. I also think you were negotiating the higher sales price to justify or reconcile your 10% ownership until we hit a market valuation of $19 million, not just $17 million, no?
“Other than that, it’s a damn good job!
“When do you need the positive research on NMN, and would you like me too throw in some Chromadex press releases taking about how Watsons has had massive success with Niagen, their best selling product.
“Then we can conclude with articles and research that show that NMN is vastly superior NR.
“And the best thing about ProHealth Longevity is not its NMN; it’s all of the new ‘NMN’s’ that are just now hitting the market—such as spermidine; time released alpha ketoglutaric acid; Fisetin, and a ton of other high-tech, longevity enhancing products—in other words it’s the line, not the product. And more that it’s just a line, it’s a 33-year—old fine. And the line is getting massively better month by month. And the company’s focus on longevity will only continue to tighten. So for a healthy future for GNC, they should look for future facing products that can extend their own Longevity.
“Let’s chat in the next day or so about that 10%. Other than that everything looks just the way I envisioned.
“Thanks Rajeev,
“Rich” (PSS, undisputed fact 3; Moralyan decl., exhibit C, pp. 36-37.) (Note: Page numbers in citations to exhibits refer to the pdf page number of the document cited. (See Cal. Rules of Court, rule 3.1110(c).))
Chitrabhanu responded to Carson by email:
“I thought the The 10% equity was always there from day one?” (PSS, undisputed fact 4; Moralyan decl., exhibit C, p. 36.)
Carson responded to Chitrabhanu by email:
“From: Rich Carson …
“on behalf of Rich Carson …
“Sent: 6/27/2021 9:17:17 PM
“To: Rajeev Chitrabhanu …
“Subject: Re: Terms of Engagement
“I imagine your memory is much better than mine, so that is likely the case. Give me a day or so to wrap my head around it to see what that ‘extra’ 10% feels like, since I was not calculating that into the picture.
“Just heading into the living room for dinner and some television. I hope your jet lag is gone and that you’re off to a great week. Thank you very much Rajeev!
“Cheerios,
“Rich” (PSS, undisputed fact 5; Moralyan decl., exhibit C, p. 36.)
On July 19, 2021, Chitrabhanu sent an email to Carson about the June 28, 2021, email:
“As suggested, Please confirm receipt of this. Thanks.” (PSS, undisputed fact 6; Moralyan decl., exhibit B, p. 32.)
On July 24, 2021, Carson responded by email to Chitrabhanu:
“From: Rich Carson …
“Sent: Saturday, July 24, 2021 6:15:45 AM
“To: Rajeev Chitrabhanu …
“Subject: re: Terms of Engagement
“Hi Rajeev,
“Your message below is nicely summed up and is exactly what we discussed. Good job.
“I think we should discuss exit strategies, should one of us need to step away from the company for any reason. We can come up with something fair for us both.
“Also, I rely on income from PH to fund my lifestyle, as discussed, I believe that we discussed that you would not take dividends due to tight cash flow. Let’s cover this one more time, as I am not sure what we previously agreed on.
[¶] … [¶]
“Your bud,
“Rich” (PSS, undisputed fact 7; Moralyan decl., exhibit B, pp. 31-32.)
On August 2, 2021, Chitrabhanu and Carson had the following chat on WhatsApp (PSS, undisputed fact 8; Moralyan decl., exhibit D, p. 41):
“Rajeev Chitrabhanu … 8/2/2021, 1:08 AM
“1)
“Show that you are accepting Nancy and Mona proposal because their opinion matters and you want to protect the interest of ProHealth
“Rajeev Chitrabhanu … 8/2/2021, 1:11 AM
“2)
“Please tell them how Rajeev saw the contract. We were discussing new ceo post Nancy’s 3 years and what it would take to bring a new person on. That is when Rajeev saw the contract and identified that their was no breakpoint of 17 Mn, something I had been telling him for the last 3 months. That is how the discussion with Nancy started.
“Rajeev Chitrabhanu … 8/2/2021, 1:16 AM
“3)
“Nothing with Rajeev is finalised. He is a friend and we met 6 months ago through a common interest in Dr. Sinclair. He is not going to be running the company. He has a full fledged business in Asia.
“The idea was to find a way to incentivise him and leverage his contacts, experience of building large companies. Hence the stake is still being discussed. It may not even happen.
“He thinks highly of Nancy and you have to no plans to rock the boat.
“Rich … 8/2/2021, 1:18 PM
“Good evening Rajeev. Thank you very much for your thoughts above. All were successfully shared with Mona on her voice mail, and I will follow up with her again by phone later in the day. This will be a nice problem to have behind us.
“Rajeev Chitrabhanu … 8/2/2021, 6:34 PM
“Ok great. Let me know after it’s sorted. Thks for the update.
“Rich … 8/2/2021, 6:41 PM
“You bet big guy. I sent an email with a letter from Mike Pfau addressing Mona and a few other things. You can check it out if you’d like. Just heading out the door to walk the dog.
“Rajeev Chitrabhanu … 8/2/2021, 7:56 PM
“Ok. I went through the mails.
“Nancy seems ok except reporting to me. Not sure I want that.
“Let’s talk about the reply to Mike.
“The contract protects Rich and prohealth except one important point that it has no mention of the 17 million unless I missed it.”
On August 3, 2021, then-CEO of ProHealth, Nancy Dayton, emailed Chitrabhanu regarding her forthcoming departure from ProHealth, copying Carson:
“From: Nancy Dayton …
“Sent: Tuesday, August 3, 2021 8:00:52 PM
“To: Rajeev Chitrabhanu …
“Cc: Richard Carson[wristwatch emoji] …
“Subject: Checking in
“Hi Rajeev,
“Attached is my employment agreement. Rich mentioned that you wanted to review this to help you hire my replacement.
“Also, I look forward to meeting with you regularly to make sure I am making the decisions that are in line with the direction you are taking the company. I would like to start a dialogue with you to see how this might work.
“I am thinking it would be good to send you a weekly email before a scheduled zoom call on items that update you on the key items I am working on and their progress. I will also include any questions that are not pressing. Through-out the week I will have pressing questions that I would like quick answers on and will communicate
these to you with additional emails.
“Because of the time difference, my preference is to meet via zoom at 7:00 am PT which I believe is 7:30 pm India Time. I can do this either Monday, Tuesday or Wednesday mornings…which ever day works for you. I can send you the weekly email a day or two before our scheduled zoom meeting. However, please know I can be flexible to reverse this and meet in the evening my time when it works better for you in the morning.
“Please let me know your thoughts and when you would like to start. I do have some pressing questions which I will send in a separate email.
“Thank you Rajeev and I look forward to the next 5 months working alongside you and learning from your wealth of expertise and knowledge. I also look forward to meeting you in person on August 23rd and 24th.
“Best regards,
“Nancy Dayton
“CEO” (PSS, undisputed fact 9; Moralyan decl., exhibit E, p. 43.)
Chitrabhanu responded to Dayton’s email that same day:
“From: Rajeev Chitrabhanu …
“on behalf of Rajeev Chitrabhanu …
“Sent: 8/3/2021 7:48:09 AM
“To: Nancy Dayton (Shared) …
“CC: Richard Carson[wristwatch emoji]…
“Subject: Re: Checking in
“Hi Nancy.
“Thanks for your email.
“I would like to set up a call for explaining the current situation. I think their is a misunderstanding.
“I don’t plan on running ProHealth and I don’t have any direction for the company.
“I have not finalised any equity arrangement, besides the recent advisory fee. It was a gesture that RIck proposed for the time that we spend.
“I will whats app you, and if possible and we will set up a catch up call first.
“Thanks.
“Rajeev” (PSS, undisputed fact 10; Moralyan decl., exhibit E, p. 43.)
On October 31, 2021, Chitrabhanu sent to Carson via WhatsApp the following message:
“Let’s try to close out our agreement too.” (PSS, undisputed fact 11; Moralyan decl., exhibit F, p. 47.)
On November 24, 2021, Chitrabhanu sent to Carson via WhatsApp the following message:
“Wanted to know what is your final percentage proposal for our partnership? We should close it out before we finalise a CEO so they know the shareholding structure.” (PSS, undisputed fact 12; Moralyan decl., exhibit G, p. 50.)
On January 2, 2022, Chitrabhanu sent to Carson via WhatsApp the following message:
“Also btw stop the payment from This month. [¶] Thank you.” (PSS, undisputed fact 13; Moralyan decl., exhibit H, p. 53.)
On March 24, 2022, Chitrabhanu forwarded Carson’s July 24, 2021, email with the following text:
“Hi Rich. Was nice talking to you. Before we finalise anything it’s imp for you to see the below.
“FYI. Just to refresh. This was what was discussed.” (PSS, undisputed fact 14; Moralyan decl., exhibit I, p. 55.)
Later on March 24, 2022, Chitrabhanu sent an email to Carson forwarding an email chain:
“To: [Carson]
“From: Rajeev Chitrabhanu
“Sent: Thur 3/24/2022 10:08:34 AM
“Subject: Fwd: Draft Summary of Terms re Rajeev
“Received: Thur 3/24/2022 10:08:38 AM
“Hi Rich,
“This is the email trail which summarised our arrangement.
“Rajeev
“From: Rajeev Chitrabhanu …
“Sent: Thursday, October 12, 2021 10:34 PM
“To: Rich Carson …
“Subject: Re: Draft Summary of Terms re Rajeev
“I accept these terms.
“Rajeev
“From:
“Sent: Tuesday, September 14, 2021 6:06:25 AM
“To: Rajeev Chitrabhanu …
“Subject: Fwd: Draft Summary of Terms re Rajeev
“Rajeev, here are Mike’s notes on our possible agreement.
“Cheerios-
“Begin forwarded message:
“From: Michael Pfau …
“Subject: Draft Summary of Terms re Rajeev
“Date: August 17, 2021 at 9:53:23 AM PDT
“To: Richard Carson [wristwatch emoji] …
“Cc: Mona Eliassen …, Joe Bishop …
“Rich:
“Per our conversation yesterday afternoon, attached for your consideration is a brief summary of the terms that you outlined for the engagement of Rajeev.
“We should discuss the vesting arrangement and buy-back arrangement that you want in order to protect you and (a) make sure that he performs to achieve vesting, and (b) in case things go sideways with Rajeev.
“Best,
“Mike [Michael E. Pfau, Reicker, Pfau, Pyle & McRoy, LLP]” (PSS, undisputed fact 15; Moralyan decl., exhibit J, p. 59.)
In addition to the communications quoted above, ProHealth offers three additional separate statement facts:
ProHealth’s first corporate bylaws were adopted on May 24, 1989. (PSS, undisputed fact 16.) (Note: This separate statement fact addresses only the issue of adoption of bylaws, not their terms.)
On October 15, 2023, ProHealth adopted Amended and Restated Bylaws. (PSS, undisputed fact 17.) (Note: This separate statement fact addresses only the issue of adoption of bylaws, not their terms.)
On October 15, 2023, the sole shareholders of ProHealth—Carson, ET Health GP, and Dan Obegi—entered into their Shareholders Agreement. (PSS, fact 18 [disputed only as to whether Chitrabhanu should have been included as a shareholder].)
(3) Motion of Chitrabhanu for Summary Adjudication
The facts relevant to the analysis of this motion are discussed below.
Analysis
“The motion shall be supported by affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken. The supporting papers shall include a separate statement setting forth plainly and concisely all material facts that the moving party contends are undisputed. Each of the material facts stated shall be followed by a reference to the supporting evidence. The failure to comply with this requirement of a separate statement may in the court's discretion constitute a sufficient ground for denying the motion.” (Code Civ. Proc., § 437c, subd. (b)(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).)
“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).)
“For purposes of motions for summary judgment and summary adjudication: [¶] … [¶]
“(2) A defendant … has met that party’s 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).)
(1) ProHealth Motion for Summary Judgment
(A) Scope of Motion
ProHealth’s motion is entitled in its caption as a motion for summary judgment, or, in the alternative, for summary adjudication. In opposition Chitrabhanu objects that the motion may only be a motion for summary judgment because the motion fails to meet any of the procedural requirements for a motion for summary adjudication.
“If made in the alternative, a motion for summary adjudication may make reference to and depend on the same evidence submitted in support of the summary judgment motion. If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.” (Cal. Rules of Court, rule 3.1350(b).)
The notice of motion states only that it is a motion for summary judgment. (ProHealth Notice of Motion, at pp. 1-2.) No separate causes of action, affirmative defenses, claims for damage, or issues of duty are stated specifically. ProHealth’s separate statement in support of the motion sets forth 18 separate statement facts “in support of its Motion for Summary Judgment” and sets forth no other facts and no other headings as could relate to an alternative motion for summary adjudication. ProHealth’s motion therefore is deficient as an alternative motion for summary adjudication.
“A motion for summary adjudication tenders only those issues or causes of action specified in the notice of motion, and may only be granted as to the matters thus specified. The movant must ‘state[ ] specifically in the notice of motion and ... repeat[ ], verbatim, in the separate statement of undisputed material facts,’ ‘the specific cause of action, affirmative defense, claims for damages, or issues of duty” as to which summary adjudication is sought. [Citation.] The motion must be denied if the movant fails to establish an entitlement to summary adjudication of the matters thus specified; the court cannot summarily adjudicate other issues or claims, even if a basis to do so appears from the papers.” (Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 743–744; accord, Homestead Savings v. Superior Court (1986) 179 Cal.App.3d 494, 498 [summary adjudication will not be granted “unless requested in the notice of motion”]; Edmon & Karnow, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2024) ¶ 10:88 [“When the notice of motion seeks only summary judgment, the presence of any triable issue requires denial of the motion. The court may not summarily adjudicate claims or defenses as to which no triable issue was raised unless requested in the notice of motion.”].)
To the extent that the court may exercise discretion to overlook this deficiency and to consider the motion as alternatively a motion for summary adjudication, the court declines to do so. (See Truong v. Glasser (2009) 181 Cal.App.4th 102, 118 [court’s power to deny summary judgment on the basis of a failure to comply with the California Rules of Court is discretionary].) Accordingly, the court addresses ProHealth’s motion solely as a motion for summary judgment.
(B) ProHealth’s Initial Burden
“ ‘ “A defendant is entitled to summary judgment if the record establishes as a matter of law that none of the plaintiff’s asserted causes of action can prevail.” [Citation.]’ The pleadings define the issues to be considered on a motion for summary judgment. [Citation.] ….” (Benedek v. PLC Santa Monica, LLC (2002) 104 Cal.App.4th 1351, 1355.)
“Summary judgment law in this state … 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. and citation omitted.)
“Code of Civil Procedure section 437c, subdivision (b)(1), requires each motion for summary judgment to be accompanied by a separate statement ‘setting forth plainly and concisely all material facts that the moving party contends are undisputed. Each of the material facts stated shall be followed by a reference to the supporting evidence.’ … California Rules of Court, rule 3.1350(d)(2) states: ‘The separate statement should include only material facts and not any facts that are not pertinent to the disposition of the motion.’ Under the Rules of Court, ‘ “Material facts” are facts that relate to the cause of action, claim for damages, issue of duty, or affirmative defense that is the subject of the motion and that could make a difference in the disposition of the motion.’ [Citation.]” (Beltran v. Hard Rock Hotel Licensing, Inc. (2023) 97 Cal.App.5th 865, 874–875, fn. omitted.)
“ ‘[A]ll material facts must be set forth in the separate statement. “This is the Golden Rule of Summary Adjudication: if it is not set forth in the separate statement, it does not exist.” ’ [Citation.]” (Parsons v. Estenson Logistics, LLC (2022) 86 Cal.App.5th 1260, 1265, fn. 5; accord, California-American Water Co. v. Marina Coast Water Dist. (2022) 86 Cal.App.5th 1272, 1296–1297.)
As the separate statement facts in support of ProHealth’s motion, identified above, demonstrate, ProHealth presents no facts to support the proposition that Chitrabhanu does not possess and cannot reasonably obtain needed evidence to support his causes of action. Instead, ProHealth presents separate statement facts and underlying evidence to negate elements of Chitrabhanu’s causes of action, most particularly, the existence of a contract between Chitrabhanu and ProHealth.
With this in mind, it is useful to address Chitrabhanu’s third cause of action for quantum meruit. In the third cause of action, Chitrabhanu alleges that he performed the services promised under the June 28 Agreement to advise ProHealth on various aspects of ProHealth’s business operations and strategy. (Complaint, ¶ 76.) Chitrabhanu alleges that the services rendered benefitted defendants. (Complaint, ¶ 78.) Chitrabhanu also alleges that he is entitled to the reasonable value of the services rendered. (Complaint, ¶ 79.)
“Quantum meruit refers to the well-established principle that ‘the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered.’ [Citation.] To recover in quantum meruit, a party need not prove the existence of a contract [citations], but it must show the circumstances were such that ‘the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made’ [citations].” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 458.) “The requisite elements of quantum meruit are (1) the plaintiff acted pursuant to ‘an explicit or implicit request for the services’ by the defendant, and (2) the services conferred a benefit on the defendant. [Citation.]” (Port Medical Wellness, Inc. v. Connecticut General Life Insurance Company (2018) 24 Cal.App.5th 153, 180.)
ProHealth’s separate statement facts do not include any facts which negate either of these two elements. The emails do not present any evidence that there was no explicit or implicit request for Chitrabhanu’s services by ProHealth; the emails instead all focus on Chitrabhanu providing services to ProHealth at its request through Carson. The principal issue addressed by the separate statement fact is whether an enforceable contract was formed between ProHealth and Chitrabhanu.
In discussing this cause of action in the motion, ProHealth argues that there are only two outcomes possible and that under either outcome, this cause of action fails. The first proposed outcome is that the court finds that a contract exists between the parties. (Motion, at p. 20.) ProHealth argues that if the court finds that a contract exists between the parties, then there is no basis for a claim in quantum meruit.
“A quantum meruit or quasi-contractual recovery rests upon the equitable theory that a contract to pay for services rendered is implied by law for reasons of justice. [Citation.] However, it is well settled that there is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation.” (Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419.) “Quantum meruit is an equitable theory which supplies, by implication and in furtherance of equity, implicitly missing contractual terms. Contractual terms regarding a subject are not implicitly missing when the parties have agreed on express terms regarding that subject. A quantum meruit analysis cannot supply ‘missing’ terms that are not missing. ‘The reason for the rule is simply that where the parties have freely, fairly and voluntarily bargained for certain benefits in exchange for undertaking certain obligations, it would be inequitable to imply a different liability....’ [Citations.]” (Id. at pp. 1419–1420.)
While the court agrees that quantum meruit and express contract are alternatives, that proposition undermines rather than supports ProHealth in this motion for summary judgment. In order to grant summary judgment based upon this outcome, the court would have determined that an enforceable contract existed, that is, that the contract element of plaintiff’s first cause of action for breach of contract is established. Because ProHealth’s argument with respect to the first cause of action is based upon ProHealth’s inferences from the emails identified in the separate statement that no contract was formed. This assumption necessarily implies that the court found at least one triable issue of fact as to the formation of the contract, thus by itself precluding summary judgment.
The assumption of finding a contract with express terms based upon ProHealth’s separate statement facts is further complicated by the absence of separate statement facts as to the remaining elements of the breach of contract cause of action. No separate statement facts are presented as to Chitrabhanu’s performance under the contract (or quasi-contract). Therefore, the court must assume full and satisfactory performance for purposes of this motion. The only argument made as to the first cause of action that is not dependent upon the non-existence of an enforceable contract is the argument that Chitrabhanu suffered no damage and so the damages element of breach of contract fails. (Motion, at p. 18.) But if an enforceable contract is assumed, the emails demonstrate that there is at least a triable issue of fact whether the enforceable contract includes as a compensation term the upfront equity position argued by Chitrabhanu. Moreover, the separate statement facts do not include any facts regarding payment made to Chitrabhanu. The only separate statement fact regarding payment relates to a request to stop payment going forward from the date of an email; the separate statement fact does not address what payments were due, nor what payments were made. (See PSS, undisputed fact 13.) Thus, if it is assumed that ProHealth’s separate statement facts show the existence of an enforceable contract, then ProHealth has failed to meet its initial burden on summary judgment as to the first cause of action or has presented facts in support of the motion from which conflicting inferences exist which creates a triable issue of fact (see Code Civ. Proc., § 437c, subd. (c)), in either case precluding summary judgment.
The second alternative outcome according to ProHealth is that the court determines that there is no contract. Under this alternative outcome, ProHealth argues that the quantum meruit claim fails because “it is undisputed that Plaintiff was compensated for his purported ‘service.’ ” (Motion, at p. 20.) As discussed above, there are no separate statement facts regarding the extent of either Chitrabhanu’s performance of services or payment to Chitrabhanu. ProHealth thus fails to meet its initial burden on summary judgment as to payment or the value of services. ProHealth further argues on this point that “Plaintiff has no evidence to show that Defendants’ requested services beyond what he was paid for, nor that Defendants promised to pay for anything beyond what he was already compensated for, through the $25,000 in 2021.” (Motion, at p. 21.) As noted above, it is insufficient for a defendant moving for summary judgment simply to “point out” that a plaintiff does not have evidence to prove a necessary element of the plaintiff’s cause of action. The defendant must provide evidence of the absence of such evidence (and that no such evidence can reasonably be obtained). There are no separate statement facts providing either such facts or citations to such evidence. Furthermore, even if prior payment was considered despite the absence of separate statement facts, the fact that the equity position was included in the discussions between the parties, regardless of whether an agreement was ultimately reached, is evidence that the value of Chitrabhanu’s services exceeded the specific monetary compensation discussed in those same emails, and so providing yet another conflicting inference from ProHealth’s own evidence.
Consequently, ProHealth has failed to meet its initial burden on summary judgment as to the third cause of action, or, alternatively, has presented evidence in support of the motion from which conflicting inferences exist that raise a triable issue of fact. In either case, ProHealth has not shown its entitlement to judgment as to the third cause of action. Because ProHealth has not shown its entitlement to judgment on this cause of action, ProHealth has not shown its entitlement to judgment as to the entirety of plaintiff’s complaint. ProHealth’s motion for summary judgment therefore will be denied.
(C) Evidentiary Matters
Based upon the disposition discussed above from the separate statement facts presented by ProHealth, the court does not need to, and declines to, rule on evidentiary objections of the parties. (See Code Civ. Proc., § 437c, subd. (q).)
(2) Carson Joinder
Defendant Carson filed a notice of joinder and joinder to ProHealth’s motion for summary judgment. The notice of joinder states: “The Joinder by Carson in ProHealth’s MSJ/MSA Motion is based on this Notice of Joinder, the attached Memorandum of Points and Authorities, the pleadings and records on file in this action, such additional briefing as may be permissibly submitted by Carson in advance of the hearing on ProHealth’s MSJ/MSA Motion, and such oral argument by Carson’s counsel as may be permitted at the time of the hearing on ProHealth’s MSJ/MSA Motion.” (Carson Joinder, at p. 2.)
The memorandum in support of the joinder addresses summary adjudication of the fourth, fifth, and sixth causes of action. As with ProHealth’s motion, the notice of motion does not comply with California Rules of Court, rule 3.1350(b). It is denied for the same reason. Moreover, joinder in motions for summary judgment is generally improper as explained in Frazee v. Seely (2002) 95 Cal.App.4th 627 (Frazee):
“[One set of moving parties] properly supported their motion for summary judgment/adjudication with a separate statement. [Another set of moving parties] filed a simple notice of joinder in the motion, but did not file their own separate statement. While this form of joinder may be sufficient for some purposes [citations], it is not sufficient for purposes of the summary judgment statute. ‘The language of the statute is clear.’ [Citation.] Each moving party shall support their motion for summary judgment with a separate statement.” (Frazee, supra, 95 Cal.App.4th at p. 636; accord, Barak v. The Quisenberry Law Firm (2006) 135 Cal.App.4th 654, 661 [“When a party merely joins in a motion for summary judgment without presenting its own evidence, the party fails to establish the necessary factual foundation to support the motion.”].)
Carson’s joinder merely joins ProHealth’s motion. This is an alternative and sufficient basis to deny the motion as to Carson.
(3) Chitrabhanu Motion for Summary Adjudication
Plaintiff Chitrabhanu concurrently moves for summary adjudication of the first cause of action of his complaint (for breach of contract) as stated in the notice of motion:
“Plaintiff respectfully move this Court for an order summarily adjudicating that:
“(1) the contract alleged in the Complaint was valid and enforceable as between ProHealth and Plaintiff;
“(2) ProHealth breached the contract alleged in the Complaint;
“(3) Plaintiff fulfilled all obligations requested of him under the contract;
“(4) Plaintiff was damaged as a result of ProHealth’s conduct; and
“(5) Plaintiff is entitled to specific performance of the contract alleged in the Complaint.” (Chitrabhanu Notice of Motion, at p. 2.)
As a plaintiff’s motion, the burdens are similar but somewhat different from the burdens of a defendant moving for summary adjudication.
“A plaintiff … has met that party’s burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff … has met that burden, the burden shifts to the defendant … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The defendant … 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)(1).)
“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).)
As subdivision (f)(1) demonstrates, the court may not separately adjudicate specific elements of a cause of action in favor of the plaintiff but may only determine whether or not the plaintiff has met his initial burden as to the entirety of a cause of action.
“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.) As alleged in the complaint, the first cause of action is for money damages “in an amount to be proven at trial, and in no event less than the value of the compensation and equity owed to him under the June 28 Agreement.” (Complaint, ¶ 70.)
“A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) A plaintiff moving for summary adjudication on a cause of action for breach of contract is not entitled to judgment on that cause of action “without showing both the fact and the amount of damages.” (Pajaro Valley Water Management Agency v. McGrath (2005) 128 Cal.App.4th 1093, 1106; accord, CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.)
Chitrabhanu does not meet his initial burden on summary adjudication on the issue of the amount of damages. Chitrabhanu alleges a right to an award of monetary damages but has presented evidence only of the fact of damage. None of Chitrabhanu’s separate statement facts provides a basis for an award of any specific amount of damages for this cause of action.
Chitrabhanu requests specific performance as a remedy “if the court finds that there is no genuine issue of material fact as to Plaintiff’s claim for breach of contract.” (Motion, at p. 18.) This request does not make up for the absence of evidence regarding the amount of damages for three reasons. First, even if the court were to award specific performance as requested, as pleaded, plaintiffs’ cause of action still involves a claim for an award of money. Second, as discussed below, there are issues of fact regarding the claim of breach contract. Third, the evidence presented in the separate statement facts are either insufficient to establish specific performance or themselves raise triable issues of fact based upon conflicting inferences.
As to the issue of triable issues of fact, the same emails discussed above in the context of ProHealth’s motion for summary judgment regarding the formation of the contract give rise to conflicting inferences as to whether a contract was formed, and more specifically, whether the contract included the equity position asserted by Chitrabhanu. Contrasting the June 28, 2021, email chain identifying terms with the March 24, 2022, email (“before we finalise anything …”), these emails may be construed as a continuing negotiation in which no agreement had previously been made. This construction is a contrary inference to Chitrabhanu’s construction of these emails demonstrating the making of an agreement followed by efforts to renegotiate. Again, conflicting inferences are sufficient to raise a triable issue of fact precluding summary adjudication.
As to the issue of specific performance, the court does not award specific performance absent a sufficient showing that specific performance is proper. Chitrabhanu argues that the adequacy of the equitable remedy need not be proven at summary judgment, citing Kaufman v. Goldman (2011) 195 Cal.App.4th 734 (Kaufman), Addiego v. Hill (1971) 17 Cal.App.3d 453 (Addiego), and a California Superior Court decision. (Motion, at p. 18.) None of these citations support Chitrabhanu’s position.
In Kaufman, the issue was the enforcement of terms of a settlement agreement entered into following a landlord-tenant dispute. (Kaufman, supra, 195 Cal.App.4th at p. 737.) The trial court granted the landlord’s motion for summary adjudication of the cause of action for specific performance and entered a judgment awarding possession of the premises to the landlord. (Ibid.) In granting specific performance, the court addressed the tenant’s arguments as to the availability of specific performance and the adequacy of the showing supporting specific performance. (Id. at pp. 742-743.) The Kaufman court did not address a situation, such as here, where a breach of contract claim is raised and the sufficiency of the non-exclusive specific performance remedy is not shown within the motion.
In Addiego, the court granted specific performance as to conveyance of stock following a trial on the merits. (Addiego, supra, 17 Cal.App.3d at p. 455-456; Addiego v. Hill (1968) 268 Cal.App.2d 280, 282-289.) This case is only pertinent to the extent that it stands for the proposition that a contract for sale of stock may, under appropriate facts, be the subject of an order for specific performance.
With respect to the Superior Court decision, “[a] trial court judgment cannot properly be cited in support of a legal argument, absent exceptions not applicable here.” (San Diego County Employees Retirement Assn. v. County of San Diego (2007) 151 Cal.App.4th 1163, 1184; accord, Santa Ana Hospital Medical Center v. Belshe (1997) 56 Cal.App.4th 819, 831 [unreported trial court decisions not citable].) The court therefore does not consider that decision.
For the foregoing reasons, Chitrabhanu’s motion for summary adjudication will be denied.