Casa Verde Capital LP et al vs Andrew Nash et al

Case Number

24CV02541

Case Type

Hearing Date / Time

Fri, 12/20/2024 - 10:00

Nature of Proceedings

Motion to Strike

Tentative Ruling

(1)       For the reasons set forth herein, the court on its own motion strikes the second amended cross-complaint of Jamie Nash, filed on September 11, 2024, as filed without leave of court.

(2)       For the reasons set forth herein, the special motion to strike of cross-defendants Casa Verde Capital, L.P., Casa Verde Capital EF, L.P., and Karan Wadhera as to the first amended cross-complaint is denied.

Background:

(1)       Allegations in the First Amended Cross-Complaint

As alleged in cross-complainant Jamie Nash’s first amended cross-complaint (FACC):

Defendant and cross-defendant Andrew Nash (Andrew) was the founder, chief executive officer, and majority shareholder of defendants and cross-defendants El Capitan Advisors, Inc. (El Capitan) and Camden Financial Group, LLC (Camden). (FACC, ¶ 20.) Andrew Nash (Andrew) was married to defendant and cross-complainant Jamie Nash (Jamie), but kept his business dealings secret from Jamie. (Note: For ease of writing and to avoid confusion of parties with the same surname, first names are used herein. No disrespect is intended.)

Andrew falsely led Jamie to believe that he was spectacularly successful financially in his business dealings through El Capitan and Camden. (FACC, ¶ 22.) In reality Andrew was engaged in handling client funds for various cannabis operations. (FACC, ¶ 23.)

In 2018, plaintiffs and cross-defendants Casa Verde Capital, L.P., and Casa Verde Capital EF, L.P., (collectively, Casa Verde) invested $1 million in El Capitan. (FACC, ¶ 24.) Casa Verde appointed cross-defendant Karan Wadhera to take Casa Verde’s seat on El Capitan’s board of directors. (FACC, ¶ 25.) Wadhera remained as a board member at all relevant times. (Ibid.)

Andrew, El Capitan, Casa Verde, and Wadhera wasted and embezzled client funds or willfully allowed such funds to be wasted and embezzled. (FACC, ¶ 26.) By late 2022, Casa Verde and Wadhera were involved in the operations with Andrew and were aware that the company was failing. (FACC, ¶¶ 27-28.)

Casa Verde and Wadhera were also aware that Planet 13 Holdings (Planet 13), a cannabis company, had deposited approximately $21 million with El Capitan. (FACC, ¶ 31.) The funds were in a Western Alliance Bank account (the 4664 Account) opened by Andrew and El Capitan for the benefit of Planet 13. (Ibid.) As of late 2022, Casa Verde and Wadhera were aware that Planet 13 was owed over $16 million that was no longer in the 4664 Account. (FACC, ¶ 35.)

Casa Verde and Wadhera were aware that $4.6 million from the 4664 Account was withdrawn on June 27, 2022, was deposited by Andrew Nash in an operating account, and, on the same day, was transferred from that operating account to an escrow for the purpose of the purchase of a residence at 210 Las Palmas Drive (the Las Palmas Property). (FACC, ¶ 47.) Andrew lied to Jamie and told her that the proceeds for the sale of the house were coming from a line of credit with one of the banks with which he was doing business. (FACC, ¶ 48.)

In the early months of 2023, Casa Verde and Wadhera developed a scheme to enter into a purchase agreement whereby El Capitan would pay Casa Verde $35 million for a stock buyback of their interest in El Capitan. (FACC, ¶ 36.) The valuation of El Capitan was not based on an audit and was fraudulent. (FACC, ¶ 37.) On April 7, 2023, Andrew and El Capitan entered into a stock repurchase agreement with Casa Verde, which required an immediate payment by El Capitan to Casa Verde of $17.5 million on or before April 14, 2023, and the balance on or before May 23, 2023. (FACC, ¶ 38.) Casa Verde and Wadhera entered into this agreement with the expectation that El Capitan would default. (FACC, ¶ 39.)

On January 22, 2024, intervenor Planet 13 Holdings (Planet 13) filed a complaint in Los Angeles Superior Court (the Planet 13 Action) against Casa Verde, Wadhera, Andrew and Jaime. (FACC, ¶ 14.) Planet 13 alleges that the Casa Verde defendants engaged in a scheme to defraud Planet 13. (Ibid.) On February 16, 2024, the Planet 13 Action court appointed a receiver. (FACC, ¶ 15.)

At the time this action was filed on May 7, 2024, Casa Verde and Wadhera were aware that Jamie had been in discussions with the counsel for Planet 13 and the receiver in the Planet 13 Action to repatriate the proceeds used for the purchase of the Las Palmas Property by Andrew for the benefit of the rightful owner of those funds, Planet 13. (FACC, ¶ 46.)

On May 16, 2023, Casa Verde filed a complaint in Los Angeles Superior Court (the LA Casa Verde Action) for breach of contract against El Capitan. (FACC, ¶ 40.) Andrew, Casa Verde, and Wadhera colluded in the filing of this lawsuit in order to give Casa Verde an opportunity to execute on that judgment before any of the clients of El Capitan would become aware of the embezzlement and before other creditors of El Capitan could make claims. (FACC, ¶ 41.) Andrew and El Capitan cooperated in this scheme with Casa Verde and Wadhera by allowing a $35 million default judgment to be entered on July 26, 2023. (FACC, ¶ 42.)

Casa Verde immediately began collection actions and levied on bank accounts of El Capitan, primarily seizing funds held in a fiduciary capacity for clients of El Capitan. (FACC, ¶ 43.) Casa Verde also seized funds from El Capitan operating accounts that they knew to be comingled with funds embezzled from El Capitan clients. (FACC, ¶ 44.) Casa Verde and Wadhera were also aware that Jamie had taken title to the Las Palmas Property by and through her family law lawyers, specifically for the purpose of removing control of the property from Andrew “with the intent of turning over the asset to a creditor of Andrew Daniel Nash and El Capitan Advisors.” (FACC, ¶ 50.)

The present lawsuit is a fraudulent attempt on the part of Casa Verde and Wadhera to use the fraudulent judgment in the LA Casa Verde Action to extort property and money from Jamie and to prevent Jamie from transferring the funds or assets to which Planet 13 and to which the receiver in the Planet 13 Action are lawfully entitled. (FACC, ¶ 51.)

(2)       Procedural History

On May 7, 2024, Casa Verde filed its complaint in this action against Andrew, Jamie, Camden, and El Capitan. The complaint asserts one cause of action for violation of the Uniform Voidable Transactions Act (Civ. Code, § 3439 et seq.).

On June 26, 2024, Planet 13 filed its motion for leave to intervene.

On August 8, 2024, Jamie filed her answer to the complaint, generally denying the allegations thereof and asserting eight causes of action. Jamie concurrently filed her original cross-complaint against Casa Verde, Wadhera, Andrew, and Camden. Jamie also filed a request for judicial notice in support of her cross-complaint.

On August 22, 2024, without leave of court or any response thereto having been filed to the original complaint, Jamie filed her FACC. The FACC asserts three causes of action: (1) fraud, against all defendants; (2) fraud, against Andrew and El Capitan; and (3) indemnity and contribution, against Andrew and El Capitan.

On September 11, 2024, without leave of court or any response thereto having been filed to the FACC, Jamie filed a second amended cross-complaint (SACC).

On September 20, 2024, the court granted Planet 13’s motion for leave to intervene and directed Planet 13 to file and serve its complaint in intervention. Planet 13’s complaint in intervention was filed later that day.

On September 24, 2024, Casa Verde and Wadhera filed their special motion to strike the FACC or alternatively specific paragraphs of the FACC. (Note: The special motion to strike is also referred to herein as an “anti-SLAPP motion.”)

On October 21, 2024, Jamie filed her answer to the Planet 13 complaint in intervention, generally denying the allegations thereof and asserting eight affirmative defenses.

On December 13, 2024, Jamie filed her opposition to the anti-SLAPP motion.

Analysis:

(1)       First or Second Amended Complaint?

The anti-SLAPP motion is directed against Jamie’s FACC. In general, the filing of a second amended pleading supersedes a first amended pleading, rendering the first amended pleading ineffective as a pleading. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 884.) In the context of an anti-SLAPP motion, again generally, the earlier filing of a second amended pleading moots an anti-SLAPP motion directed against a superseded first amended pleading. (See JKC3H8 v. Colton (2013) 221 Cal.App.4th 468, 479.)

“A party may amend its pleading once without leave of the court at any time before the answer, demurrer, or motion to strike is filed ….” (Code Civ. Proc., § 472, subd. (a).) A party, however, does not have a right to amend its pleading more than once without leave of court. (Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 575.) A court appropriately strikes a pleading requiring leave of court for which no leave had been first obtained. (Id. at p. 579.) Jamie concedes that the SAC was improperly filed without leave of court. (Opposition, at p. 2, fn. 1.)

Because here, as in Hedwall, Jamie filed the SACC without leave of court, the court will strike the SACC as not filed in conformity with the laws of this state. (See Code Civ. Proc., § 436, subd. (b); Hedwall v. PCMV, LLC, supra, 22 Cal.App.5th at p. 579.) With the SACC stricken, Jamie’s operative pleading is the FACC. The anti-SLAPP motion is thus not mooted by the improper filing of the SACC.

(2)       Timeliness of Opposition

“Anti-SLAPP motions are subject to the filing and service deadlines applicable to motions generally [citation].” (Edmon & Karnow, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2024) ¶ 7:961; accord, Code Civ. Proc., §§ 425.16, 1005, subd. (a)(13).) “All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days, and all reply papers at least five court days before the hearing.” (Code Civ. Proc., § 1005, subd. (b).)

The opposition was filed and served on December 13, five court days before this hearing on December 20, which is untimely. Since the opposition was filed and served at the same time that a reply was due, the timing of the opposition deprives the moving parties of an adequate opportunity to respond to the opposition. The court will therefore disregard the opposition as untimely. (Cal Rules of Court, rule 3.1300(d); see Jack v. Ring LLC (2023) 91 Cal.App.5th 1186, 1210.) Nonetheless, the analysis and conclusion are the same even if the opposition were considered.

(3)       Requests for Judicial Notice

In support of the motion, the moving parties request that the court take judicial notice of: (Defendants’ Request for Judicial Notice, exhibit 1) the complaint filed in the LA Casa Verde Action; and (exhibit 2) the judgment entered in the LA Casa Verde Action. These requests for judicial notice are granted. (See Evid. Code, § 452, subd. (d)(1).) Judicial notice does not extend to the truth of factual matters set forth in court documents. (Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1569.)

(4)       Anti-SLAPP Motion

“The anti-SLAPP statute [(Code Civ. Proc., § 425.16)] is ‘designed to protect defendants from meritless lawsuits that might chill the exercise of their rights to speak and petition on matters of public concern. [Citations.] To that end, the statute authorizes a special motion to strike a claim “arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.” (§ 425.16, subd. (b)(1).)’ [Citation.]” (Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1008–1009 (Bonni).)

“Litigation of an anti-SLAPP motion involves a two-step process. First, ‘the moving defendant bears the burden of establishing that the challenged allegations or claims “aris[e] from” protected activity in which the defendant has engaged.’ [Citation.] Second, for each claim that does arise from protected activity, the plaintiff must show the claim has ‘at least ‘minimal merit.” ’ [Citation.] If the plaintiff cannot make this showing, the court will strike the claim.” (Bonni, supra, 11 Cal.5th at p. 1009.)

“At [the first] first step, courts are to ‘consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability.’ [Citation.] The defendant’s burden is to identify what acts each challenged claim rests on and to show how those acts are protected under a statutorily defined category of protected activity.” (Bonni, supra, 11 Cal.5th at p. 1009.)

As noted above, the FACC asserts three causes of action, of which only the first cause of action for fraud is asserted against moving parties Casa Verde and Wadhera. Based upon the charging allegations of the FACC as to this cause of action it is wholly unclear what is the basis of the cause of action for fraud beyond a general scheme to which the term “fraudulently” is repeatedly, but confusingly applied. As a consequence, it is unclear to what extent, if any, this cause of action arises out of protected activity within the meaning of the anti-SLAPP statute.

“A claim arises from protected activity when that activity underlies or forms the basis for the claim. [Citations.] Critically, ‘the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.’ [Citations.] ‘[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute.’ [Citations.] Instead, the focus is on determining what ‘the defendant’s activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.’ [Citation.] ‘The only means specified in section 425.16 by which a moving defendant can satisfy the [“arising from”] requirement is to demonstrate that the defendant’s conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e)....’ [Citation.] In short, in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062–1063.)

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “ ‘In its broad, general sense the concept of fraud embraces anything which is intended to deceive, including all statements, acts, concealments and omissions involving a breach of legal or equitable duty, trust or confidence which results in injury to one who justifiably relies thereon. …’ [Citation.]” (Ach v. Finkelstein (1968) 264 Cal.App.2d 667, 674, italics added.)

The charging allegations of the first cause of action allege generally that the cross-defendants’ scheme “involved intentional and negligent misrepresentation of fact and concealment of facts, with the intent to fraudulently obtain an interest in the property of Cross-Complainant, including, the Las Palmas Property which in whole or in part was being held for the benefit of Planet 13 and with the intent to fraudulently obtain an interest in other assets of Cross-Complainant.” (FACC, ¶ 53.) Jamie further alleges that the “perpetration of this fraud and the actions of Cross-Defendants have proximately caused damages to the Cross-Complainant, including physical and emotional distress, and other general and special damages to be established in accordance with proof.” (FACC, ¶ 54.)

The FACC does not provide any allegations of reliance by Jamie upon a false representation, concealment, or nondisclosure by Casa Verde or Wadhera. By contrast, Jamie alleges concealments and misrepresentation by Andrew as to his business dealings. (FACC, ¶¶ 21, 22, 26.) These allegations form the basis for the fraud cause of action against Andrew and El Capitan, but not against the moving parties. (Compare FACC, ¶ 53 with ¶ 57.) The only property involved in the first cause of action is the Las Palmas Property, to which Jamie more specifically alleges she has title for the purpose of removing control of the property from Andrew with the intent of turning the asset over to a creditor of Andrew and El Capitan. (FACC, ¶ 50.) Jamie also alleges:

“The present lawsuit is a further fraudulent attempt on the part of Casa Verde and Wadhera to use the fraudulent judgment in the Casa Verde Lawsuit to extort property and money from Cross-Complainant and to prevent Cross-Complainant from transferring the funds or assets to which Planet 13 and to which the Receiver in the Planet 13 Lawsuit are lawfully entitled.” (FACC, ¶ 51.)

While the allegation of paragraph 51 mentions a “fraudulent attempt,” this allegation plainly is not a basis for the fraud cause of action because there is no alleged reliance in the attempt and, since the allegation is of an attempt, rather than of a completed act, there is no allegation of loss to Jamie. “To recover for fraud, a plaintiff must prove loss proximately caused by the defendant’s tortious conduct. [Citations.] ‘Deception without resulting loss is not actionable fraud.’ [Citation.]” (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 65.)

So, while litigation is alleged in the FACC and litigation ordinarily involves protected activity under the anti-SLAPP statute, those allegations are not shown to be actions that supply any element of the cause of action for fraud against the moving parties.

“Medical Marijuana, Inc. v. ProjectCBD.com (2016) 6 Cal.App.5th 602, is persuasive—if not on point. There, the court affirmed the denial of an anti-SLAPP motion with this language: ‘It would be inappropriate for us to insert into a pleading claims for relief based on allegations of activities that plaintiffs simply have not identified, even if the parties suggest on appeal how plaintiffs might have intended to frame those claims or attempt to identify the specific conduct or assertions of statements alleged to be false on which plaintiffs intended to base such claims for relief. It is not our role to engage in what would amount to a redrafting of the first amended complaint in order to read that document as alleging conduct that supports a claim that has not in fact been specifically alleged, and then assess whether the pleading that we have essentially drafted could survive the anti-SLAPP motion directed at it.’ [Citation.]” (Central Valley Hospitalists v. Dignity Health (2018) 19 Cal.App.5th 203, 218.)

So, while a claim for damages arising from the filing or maintenance of litigation may well satisfy the first prong of the anti-SLAPP analysis, a cause of action for fraud which does not connect any aspect of litigation with the elements of fraud does not. The motion will therefore be denied.