Mark Karpeles vs Howard Hudson et al

Case Number

24CV01355

Case Type

Hearing Date / Time

Mon, 06/24/2024 - 10:00

Nature of Proceedings

Demurrer; Motion: Strike Portions of the Complaint

Tentative Ruling

Mark B. Karpeles v. Howard R. Hudson, et al.           

Case No. 24CV01355       

Hearing Date: June 24, 2024                                      

MATTERS:             (1) Demurrer To Plaintiff’s Complaint

                                    (2) Motion To Strike Portions Of Plaintiff’s Complaint

ATTORNEYS:        For Plaintiff Mark B. Karpeles, as Trustee of the Karpeles Administrative Trust and Special Administrator of the Estate of David Karpeles and Marsha Karpeles: Jason W. Wansor, R. Scott Mullen, Rogers, Sheffield & Campbell, LLP

For Defendants Howard R. Hudson and Howard Hudson & Co.: Marshall R. Cole, Kyle R. Besa, Nemecek & Cole

TENTATIVE RULING:

(1) The demurrer of defendants to plaintiff’s complaint is sustained with leave to amend.

(2) The motion of defendants to strike portions of plaintiff’s complaint is denied.

(3) Plaintiff shall file and serve a first amended complaint on or before July 10, 2024.

Background:

Plaintiff Mark B. Karpeles (Karpeles), as Trustee of the Karpeles Administrative Trust and Special Administrator of the Estate of David Karpeles (David) and Marsha Karpeles (Marsha), filed a complaint in this matter alleging two causes of action against Howard R. Hudson (Hudson) and Howard Hudson & Co. (HHC) (collectively, defendants): (1) professional malpractice; and (2) breach of contract. (Note: To avoid confusion due to common familial surnames, the court will refer to David and Marsha Karpeles by their first names. No disrespect is intended.) As alleged in the complaint:

David and Marsha, who are the parents of Karpeles, created the Karpeles Manuscript Library (the museums), which consist of thirteen locations across the United States, to give the public an opportunity to view historical manuscripts that they had purchased during their lifetimes. (Compl., ¶¶ 7, 11-12.) To cover various expenses, David and Marsha donated funds to the museums on an as-needed basis, which ranged between $500 to $5,000 per week. (Id. at ¶¶ 14-16.) Marsha became incapacitated on June 14, 2021, and David passed away on January 19, 2022. (Id. at ¶ 8.)

On April 6, 2021, David and Marsha were served with a Notice of Deficiency (the IRS Notice) issued by the Internal Revenue Service (the IRS) regarding tax returns for tax years 2016 and 2017. (Compl., ¶ 17 & Exh. 1.) According to the IRS Notice, David and Marsha had failed to pay taxes in the amount of $210,208 for 2016, and $91,199 for 2017. ((Id. at ¶ 18 & Exh. 1.) In addition, the State of California Franchise Tax Board (the FTB) issued a notice to David and Marsha (the FTB Notice) regarding a deficiency in their state taxes. (Id. at ¶ 19 & Exh. 2.) According to the FTB, David and Marsha owed taxes in the amount of $156,210.35 for tax years 2016 and 2017. (Id. at ¶ 20.)

In July 2021, David and Marsha challenged the IRS Notice by initiating proceedings in the Tax Court of the United States. (Compl., ¶ 21.) Ultimately, Karpeles settled the tax deficiency with the IRS out of trust and estate assets, reducing the 2016 tax deficiency to $173,068, and the 2017 deficiency to $39,665. (Id. at ¶ 22.) On November 18, 2022, Karpeles sent to the IRS a cashier’s check in the amount of $268,201.52 constituting the reduced tax penalty and estimated interest and penalties. (Id. at ¶ 23 & Exh. 3.)  

Though the IRS advised Karpeles of its receipt of the payment made by Karpeles on November 18, 2022, the IRS included an additional deficiency for interest and penalties in the amount of $76,536.16 for tax year 2016 and $78,246.29 for tax year 2017. (Compl., ¶ 24 & Exh. 4.) Karpeles opted to pay the additional charges and made an additional payment to the IRS of $154,782.45. (Id. at ¶ 25.) Separately, Karpeles settled with the FTB, making a payment of $160,311 which included the state tax deficiency plus interest and penalties. (Id. at ¶ 26.) The payments made by Karpeles to the IRS and the FTB totaled nearly $600,000. (Id. at ¶ 27.)

Hudson is a certified public accountant who operates and conducts business under HHC. (Compl., ¶¶ 2-3.) For 25 years, David and Marsha had engaged defendants to prepare their tax returns. (Id. at ¶ 28.) Defendants advised David and Marsha with respect to the preparation of their 2016 and 2017 tax returns. (Id. at ¶ 29.) Though David and Marsha claimed tax deductions for charitable contributions to the museums in tax years 2016 and 2017, defendants failed to collect from the museums, or submit, contemporaneous written acknowledgments of the charitable contributions made by David and Marsha as required under the Internal Revenue Code. (Id. at ¶¶ 30-34.) As a result of defendants’ failure to comply with Internal Revenue Code requirements with respect to the submission of contemporaneous written acknowledgements, David and Marsha incurred tax liabilities. (Id. at ¶ 35.)

On April 25, 2024, defendants filed a demurrer to the complaint on the grounds that each of the causes of action alleged therein are governed and barred by the two year statute of limitations under Code of Civil Procedure section 339, subdivision (1), and the “primary right” theory of code pleading. (See Demurrer at p. 6.) Defendants have concurrently filed a motion for an order striking portions of the complaint on the same grounds.

Karpeles has filed a combined opposition to the demurrer and motion to strike.

Analysis:

(1) The Demurrer

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

The first cause of action:

As grounds for the demurrer to the first cause of action, defendants contend that under the rule announced in International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 620 (Feddersen), the two-year limitations period for Karpeles to bring a professional accountant malpractice cause of action under Code of Civil Procedure section 339, subdivision (1), commenced on April 6, 2021, or the date of the IRS Notice which defendants contend constitutes a final determination of David and Marsha’s tax deficiency. Accordingly, defendants argue, the limitations period to bring the claims alleged in the first cause of action for professional malpractice expired on April 6, 2023. Because the complaint was filed after this date, defendants argue, the first cause of action is time barred. (Note: Undesignated code references shall be to the Code of Civil Procedure unless otherwise stated.)

In opposition to the demurrer, Karpeles does not dispute that the first cause of action for professional malpractice is governed by the two year statute of limitations under section 339, subdivision (1). (See Code Civ. Proc., § 339, subd. (1).) Karpeles also asserts that the decision in Feddersen is “on point as to the issues raised.” (Opp. at p. 8, l. 26-p. 9, l. 7.) Karpeles contends that, under the decisions in Feddersen and Moss v. Duncan (2019) 36 Cal.App.5th 569 (Moss), the actual injury which commenced the statute of limitations under the facts alleged in the complaint did not occur until Karpeles settled and paid the tax deficiency stated in the FTB Notice which, as alleged in the complaint, occurred in 2023. In addition, Karpeles argues, the allegations of the complaint show that the IRS Notice was not final because additional deficiencies were assessed by the IRS on February 14, 2023, as reflected in the IRS letter attached as exhibit 4 to the complaint. For these reasons and because no tax was actually assessed on the date of the IRS Notice, Karpeles argues, the complaint was timely filed under Code of Civil Procedure section 339, subdivision (1).

The parties here do not dispute that the first cause of action for professional malpractice is governed by the two-year statute of limitations under section 339, subdivision (1). (See Sahadi v. Scheaffer (2007) 155 Cal.App.4th 704, 707.) The parties also do not effectively dispute relevant facts alleged in the complaint with regard to whether defendants prepared David and Marsha’s tax returns for tax years 2016 and 2017, the date of the IRS Notice, the date of the FTB Notice, dates on which payments were made by Karpeles, or the amount of the payments made by Karpeles. Though the question of whether an action is barred by a statute of limitations is ordinarily a question of fact, under circumstances where, such as here, “the relevant facts are not in dispute, the application of the statute of limitations may be decided as a question of law.” (Feddersen, supra, 9 Cal.4th at p. 611; Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112 [resolving statute of limitations issues is “normally a question of fact”].)

The parties each appear to contend that the decisions in Feddersen and Moss are dispositive of the issues presented on demurrer. In Feddersen, the defendant, an accounting firm, had prepared tax returns for plaintiffs, which were a corporation and its subsidiary whose corporate status yielded certain tax benefits provided the subsidiary satisfied the documentation requirements of the Internal Revenue Code with respect to certain loans and pricing agreements. (Feddersen, supra, 9 Cal.4th at p. 609.) Defendant accounting firm in Feddersen failed to provide the necessary documentation on behalf of the plaintiff subsidiary for the 1983 and 1984 tax returns. (Ibid.)

An audit of the Feddersen corporate plaintiff’s tax returns occurred in 1984, which included an audit of the corporate status of the subsidiary and during which defendant accounting firm acknowledged that he had forgotten or missed required document filings. (Feddersen, supra, 9 Cal.4th at p. 609.) Two years later, in 1986, the IRS notified the plaintiff subsidiary that, because defendant accounting firm had failed to provide proper documentation for certain loans, the subsidiary’s corporate status would be disqualified. (Ibid.)

Under the facts of Feddersen, a preliminary audit was issued by the IRS in June 1987, indicating its intent to disqualify the plaintiff subsidiary’s corporate status and to impose tax penalties for years 1983 and 1984. (Feddersen, supra, 9 Cal.4th at p. 610.) The IRS audit in Feddersen was finalized on May 16, 1988, when a deficiency was assessed and taxes and penalties were imposed. (Ibid.) Plaintiffs in Feddersen (i.e., the corporation and its subsidiary) filed a complaint May 15, 1990, which the court noted occurred four years after plaintiffs were first advised by the IRS that the subsidiary would likely be disqualified for failure to file proper documentation, three years after the preliminary audit report was prepared, and “one day short of” two years after the tax deficiency was assessed by the IRS. (Ibid.)

Defendant accounting firm in Feddersen sought summary judgment on the grounds that the action was barred under section 339, subdivision (1), because the “actual injury” to plaintiffs occurred no later than 1986 when the subsidiary withdrew a settlement offer in unrelated litigation based on the expected disqualification of its corporate status. (Feddersen, supra, 9 Cal.4th at p. 610.) In opposition to the summary judgment motion of defendant accounting firm, plaintiffs argued that the limitations period did not commence until May 16, 1988, or the date on which the audit by the IRS was finalized. (Id. at p. 611.) The trial court granted defendant accounting firm’s motion for summary judgment, which was affirmed on appeal, based on the court’s conclusion that plaintiffs suffered actual harm in 1986, when a line of credit was cut by a banking institution, or at the latest when the IRS issued a preliminary audit report. (Ibid.)

In reversing the judgment of the Court of Appeal, the Supreme Court of California noted that the dispositive issue in Feddersen was when plaintiffs had suffered “actual harm”. (Feddersen, supra, 9 Cal.4th at p. 611.) Based on its review of IRS procedures for the examination of tax returns and assessment of tax deficiencies, the Feddersen court noted that the preliminary findings of a tax examiner are merely proposed findings which are subject to negotiation, but that “[o]nce a deficiency is assessed, … either by the taxpayer’s consent to deficiency assessment, or by receipt of a final deficiency notice pursuant to Internal Revenue Code section 6212 et seq., the matter is final as to the IRS and subject to legal appeal in federal tax court.” (Id. at pp. 612-613.) The court further noted that, under the facts of Feddersen, plaintiffs had acknowledged the deficiency assessment of the IRS and agreed to pay taxes and penalties due on May 16, 1988, the same date the IRS assessed the deficiency. (Id. at p. 613.)

The court in Feddersen further noted that the IRS may select a taxpayer return for audit based on reasons unrelated to accountant malpractice and that the term “actual injury” is a “legal term of art which recognizes that an inchoate or potential injury cannot give rise to a professional malpractice action until there has been an actual determination that the accountant’s alleged negligence is related to the deficiency assessment.” (Feddersen, supra, 9 Cal.4th at p. 620.) However, once the audit is finalized, the court found that “the harm caused by the accountant’s negligence is no longer contingent and the taxpayer’s cause of action in tort for alleged malpractice against the accountant accrues under section 339, subdivision 1.” (Ibid.) Accordingly, under the facts present in Feddersen, “actual injury” to plaintiffs was determined by the court to have occurred upon the issuance of a tax penalty assessment or upon “finality” of the audit process notwithstanding the fact that earlier events may have resulted in the discovery by plaintiffs of the accountant’s negligence. (Ibid. [also noting that earlier events were based on a “tentative assessment of potential liability only”] (original italics).) The court further noted that, to commence the limitations period earlier than the date or notice of deficiency assessment when actual injury is “still speculative and deficiency assessment uncertain” would “defeat[] the purpose of California’s ‘discovery plus actual injury rule.’” (Id. at p. 621.)

In Moss, the court applied the decision in Feddersen to an action involving state taxes assessed by the FTB. (Moss, supra, 36 Cal.App.5th at p. 575.) Plaintiff in Moss was notified by the FTB in May 2010 that it was auditing plaintiff’s 2006 tax returns regarding a loan accounted for by plaintiff to its sole shareholder. (Id. at pp. 572-573.) The defendant accountant in Moss, who had been hired by plaintiff to prepare tax returns, responded to the FTB who, in turn, notified plaintiff on August 5, 2010, that it rejected defendant’s position and considered the transaction to be a taxable distribution resulting in the Moss plaintiff’s sole shareholder owing more than $1 million in taxes. (Id. at p. 573.)

Following the issuance of a notice by the FTB on April 13, 2011, in which the FTB proposed an assessment of taxes on the plaintiff’s sole shareholder, and disputes and negotiations with the FTB, plaintiff in Moss reached a settlement with the FTB on May 19, 2015, and filed a complaint against the defendant accountant approximately 3 months later. (Moss, supra, 36 Cal.App.5th at p. 573.) Applying the rule announced in Feddersen, the court in Moss noted that, although plaintiff in that case knew of potential liability by 2010, the actual injury to plaintiff, which the court described as the “final assessment” by the FTB, occurred when plaintiff and the FTB agreed on a settlement, which had occurred within two years before the date the complaint in Moss was filed. (Id. at pp. 577-578.) Therefore, the court found that the trial court had erred when it determined that the limitations period commence when the FTB issued the notice of the “proposed” assessment. (Id. at p. 578.) Therefore, pursuant to the decisions in both Feddersen and Moss, the statute of limitations in an accountant malpractice case commences upon a final deficiency assessment whether issued by the IRS or the FTB. (Ibid.; Feddersen, supra, 9 Cal.4th at p. 622.)

The IRS Notice and FTB Notice at issue here are attached to the complaint as, respectively, exhibits 1 and 2. On demurrer, the court may consider and accept as true evidentiary facts found in exhibits attached to the complaint, which are given precedent over any inconsistent allegations of the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.) The court may also take judicial notice of the legal effect of exhibits to a complaint. (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 754-755 [judicial notice of government document].) In addition, to the extent an exhibit to a complaint is ambiguous and may be construed in the manner alleged by the plaintiff, the court “must accept the construction offered by plaintiff.” (SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 83.)

The court has reviewed the IRS Notice is attached to the complaint as exhibit 1. Based on the description of the deficiency assessment procedures set forth in Feddersen, supra, 9 Cal.4th at p. 612, and considering the provisions of section 6212 of the Internal Revenue Code (26 U.S.C. §§ 6212), the IRS Notice attached to the complaint appears to constitute a final deficiency assessment by the IRS with respect to tax years 2016 and 2017. For example, the IRS Notice informs David and Marsha that if they wish to contest the “final determination” stated therein, they have 90 days from the mailing date of the letter to file a petition with the United States Tax Court. (Compl., Exh. 1 at p. 1; see also Feddersen, supra, 9 Cal.4th at p. 612 [a notice of deficiency giving the taxpayer 90 days to file a petition constitutes a final determination]; 26 U.S.C. §§ 6212(a), 6213(a); Moretti v. C.I.R. (2d Cir. 1996) 77 F.3d 637, 642 [the Tax Court may assert jurisdiction to hear a taxpayer claim for redetermination of tax liability once a notice of deficiency has been sent].) These examples are intended to be illustrative but not exhaustive. For all reasons discussed above, the allegations of the complaint including the matters appearing in the exhibits thereto indicate that the IRS Notice constitutes a final assessment by the IRS of David and Marsha’s tax deficiencies for tax years 2016 and 2017.

Regarding Karpeles’ apparent argument that the IRS Notice was not a final deficiency assessment because the IRS assessed additional amounts for interest and penalties on February 14, 2023, the court notes that the amount of the tax deficiency stated in the IRS Notice is $301,407. (Compl., ¶ 18 & Exh. 1.) Karpeles alleges that he paid the amount of $268,201.52 on November 18, 2022, as reflected in exhibit 4 to the complaint. (Id. at ¶ 23.) The letter attached as exhibit 4 to the complaint was issued by the IRS to David and Marsha and describes a “balance” owed for interest and penalties through March 5, 2023, which, according to the contents of exhibit 4, would continue to accrue until the balance of the deficiency assessed in the IRS Notice was paid in full. (Id. at Exh. 4 at p. 1.) For these reasons, exhibit 4 appears to describe interest and penalties resulting from or charged on the unpaid remaining balance of the deficiency stated in the IRS Notice attached as exhibit 1. Therefore, the document attached as exhibit 4 to the complaint cannot reasonably be construed as a final deficiency notice from the IRS as alleged or suggested by Karpeles.

Giving the complaint a reasonable interpretation, and for all reasons discussed above, the limitations period under section 339, subdivision (1), commenced on April 6, 2021, or the date the IRS assessed the tax deficiencies and issued the IRS Notice which, for reasons discussed above, constitutes a final assessment by the IRS. Under Feddersen and Moss, Karpeles suffered actual injury on April 6, 2021, which, according to the allegations of the complaint, was a direct result of the purported failure of defendants to submit contemporaneous written acknowledgments substantiating the charitable contribution deductions claimed by David and Marsha when preparing David and Marsha’s tax returns for tax years 2016 and 2017. (See Compl., ¶¶ 30-35.) Therefore, under section 339, subdivision (1), and the facts alleged in the complaint, the limitations period to bring a cause of action for professional negligence based on the conduct alleged in the complaint expired on April 6, 2023.

In addition, and notwithstanding whether the FTB Notice constitutes a final assessment under Feddersen or Moss, a reasonable interpretation of the complaint shows that Karpeles alleges that the same conduct (i.e., the failure by defendants to obtain and submit contemporaneous written acknowledgments substantiating deductions claimed by David and Marsha) also resulted in the issuance of the FTB Notice. Further, there are no allegations in the complaint to suggest that different conduct constitutes a breach of duty by defendants with respect to the professional malpractice cause of action, nor does Karpeles explain in his opposition whether different conduct alleged in the complaint constitutes an alleged breach of duty with respect to any tax deficiency assessed by the FTB. It can also be inferred from the express allegations of the complaint that, prior to the issuance of the FTB Notice, the FTB issued a final assessment for tax years 2016 and 2017. (See, e.g., Compl., Exh. 2 at p. 1 [referencing a balance owed for tax years 2017 and 2016 and previously billed by the FTB].)

For all reasons discussed above, the cause of action for professional malpractice with respect to the state tax deficiency assessed by the FTB was also established on April 6, 2021, notwithstanding whether Marsha, David, or Karpeles sustained all of the damages occasioned by defendants’ purported negligence on that date with respect to any state tax deficiency. (Feddersen, supra, 9 Cal.4th at pp. 606, 608; see also Van Dyke v. Dunker & Aced (1996) 46 Cal.App.4th 446, 452 [client may suffer actual harm before all of the damages caused by the professional negligence have been sustained]; Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 750, 752 [also noting that uncertainty as to proof or the amount of damages does not toll the limitations period].) Therefore, and for all reasons discussed above, because the first cause of action for professional malpractice was brought after the statute of limitations expired on April 6, 2023, the court will sustain the demurrer to the first cause of action alleged in the complaint.

Demurrer to second cause of action:

In the second cause of action for breach of contract, Karpeles alleges that defendants had a contractual relationship with David and Marsha under which defendants agreed to prepare tax returns for the years 2016 and 2017 and to formulate and execute a plan to reduce David and Marsha’s tax liability. (Compl., ¶ 44.) Karpeles further alleges that defendants breached the contract with David and Marsha by failing to submit contemporaneous written acknowledgments supporting the charitable contribution deductions claimed by David and Marsha for years 2016 and 2017. (Id. at ¶ 46.)

As the sole grounds for demurrer to the second cause of action, defendants contend that because the breach of contract claim is based on the same set of facts and invasion of rights alleged in the first cause of action for professional malpractice, it is also governed by the two-year statute of limitations under section 339, subdivision (1). Because the statute of limitations expired on April 6, 2023, defendants argue, the second cause of action is also time barred.

The same analysis and reasoning applies. The second cause of action for breach of contract is also based on the alleged failure by defendants to submit contemporaneous written acknowledgments to support the charitable contribution deductions claimed by David and Marsha during tax years 2016 and 2017, which resulted in the assessment of state and federal tax deficiencies. (See Compl., ¶ 46.) Therefore, the second cause of action is governed by the two year limitations period under section 339, subdivision (1). (Moss, supra, 36 Cal.App.5th at p. 574.) Accordingly, and for all reasons further discussed above, the court will also sustain the demurrer to the second cause of action for breach of contract.

Leave to amend:

Karpeles bears the burden to show a reasonable possibility that the defects discussed herein can be cured by amendment to the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In his combined opposition, Karpeles requests that the court grant leave to amend to permit Karpeles to provide a fuller record of and further background regarding the FTB and IRS proceedings including Karpeles’ settlement of David and Marsha’s tax liabilities. As the complaint is an original pleading and does not necessarily show on its face that it is incapable of amendment, the court will grant Karpeles leave to amend. (Eghtesad v. State Farm General Insurance Company (2020) 51 Cal.App.5th 406, 411-412.)

(2) Motion To Strike

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof[.]” (Code Civ. Proc., § 435, subd. (b)(1).) In ruling on a motion to strike, a court may “strike out any irrelevant, false, or improper matter inserted in any pleading” or “strike  all or part of any pleading not filed in conformity with applicable law, court rules, or an order of the court” (Code Civ. Proc., §436.) The grounds for a motion to strike must appear on the face of the pleading or from matters which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).) To determine a motion to strike, the court reads the allegations of the subject pleading “as a whole, all parts in their context” and assumes their truth. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)

The motion to strike challenges portions of the complaint based on the same arguments advanced in the demurrer and further discussed above with respect to whether the causes of action alleged in the complaint are barred under section 339, subdivision (1). (See Notice at p. 3, ll. 24-27.) As the court will sustain the demurrer with leave to amend, the motion to strike is moot and will be denied on that basis.

(3) Requests For Judicial Notice

The court will grant defendants’ request for judicial notice of California Revenue and Taxation Code sections 19033, subdivision (a), 19034, subdivision (a), 19041, subdivision (a), and 19042. (Def. RFJN, p. 2 & ¶¶ 1-4 & Exhs. 1-4; Evid. Code, § 452, subd. (a).)

Though not necessary, the court will grant the request of Karpeles for judicial notice of the complaint filed in this action and the exhibits thereto. (Karpeles RFJN, p. 2, ll. 8-10; Evid. Code, § 452, subd. (d)(1).) Judicial notice of the complaint and its exhibits does not extend to the truth of any factual assertions appearing in these records. (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 483.)