LAW AND MOTION TENTATIVE RULINGS DATE: July …...2020/07/21 · Department 6, Honorable Maureen A. Folan Farris Bryant, Courtroom Clerk 191 North First Street, San Jose, CA 95113

SUPERIOR COURT, STATE OF CALIFORNIA

COUNTY OF SANTA CLARA

Department 6, Honorable Maureen A. Folan Farris Bryant, Courtroom Clerk

191 North First Street, San Jose, CA 95113

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LAW AND MOTION TENTATIVE RULINGS

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LINE # CASE # CASE TITLE RULING

LINE 1 18CV333075 Christopher Alafi v. Stanley

Cohen et al.

Defendant Cohen’s Motion to Compel

Discovery Responses is Withdrawn. Discovery

responses were provided. This matter shall go

off calendar.


Cohen et al.

The Application of Alyssa C. Scruggs to Appear Pro

Hac Vice is UNOPPOSED and GRANTED, good

cause appearing. The Court will sign the proposed

order submitted.


Cohen et al.

The Application of Laurence A. Schoen to Appear

Pro Hac Vice is UNOPPOSED and GRANTED,

good cause appearing. The Court will sign the

proposed order submitted.


Cohen et al.

Click Control Line 4 for Tentative Ruling


Cohen et al.



Cohen et al.


LINE 7 19CV349677 Triple B Investments, LLC v.

Don Jensen et al


LINE 8 19CV352226 Wells Fargo Bank, N.A. v.

Bernadette Duque


LINE 9 18CV335711 Tuhin Roy v. Marvin Burkett A Notice of Unconditional Settlement was filed on 8-

26-20, thus mooting Plaintiff’s Discovery Motion.

OFF CALENDAR.







LINE 10 20CV362376 Sarah Vaughn v. Linda Hibbs The Court continues this particular discovery motion

to November 5, 2020 at 9am. The Court is sensitive

to the positions both sides have asserted. The Court

wants to see what the Covid-19 situation is in early

November and whether the current restrictions have

been lifted or eased. Both sides should continue to

meet and confer to see if some compromise can be

reached before the November hearing date on the

subject depositions. Can the depositions be

conducted outdoors? Can plexiglass be used for an

indoor, socially distanced deposition? Can the

participants be tested and provide negative test

results close to the deposition dates? Be creative!

LINE 11 17CV307525 Discover Bank v. Minh Phan The Motion to Withdraw as Counsel for Defendant

Minh Phan is UNOPPOSED and GRANTED, good

cause appearing. The Court will sign the proposed

order submitted.

LINE 12 17CV319483 Connect Work Thrive LLC v.

Quixey Inc.

Judge Arand will hear defendant Quixey, Inc’s

Motion for Sanctions on 10-26-2020 at 9am in Dept.

9.

LINE 13 19CV341429 Department Stores National

Bank v. Neeraj Gill

Plaintiff’s Motion to Enter Judgment Pursuant to

Stipulation under Code of Civil Procedure Section

664.6 is UNOPPOSED and GRANTED, good cause

appearing. Judgment shall be entered in favor of

plaintiff and against defendant Neeraj Gill in the

amount of $1,671.91. Moving party must prepare

proposed order and judgment.

LINE 14 19CV342353 Matilde Orozco v. Oscar Avina

et al

Plaintiffs’ Motion to Consolidate the Related Cases

of Orozco and Singh for Trial Purposes is

GRANTED, good cause appearing pursuant to Code

of Civil Procedure 1048 (a). Both cases involve

common issues of law and fact, have identical

defendants and arise out of a single automobile

accident. The Court firmly believes that

consolidation will promote judicial economy, avoid

the duplication of witness testimony and help resolve

the cases in a more timely and efficient manner. The

Court is not persuaded by any of the opposition

arguments asserted. The Court will prepare the

order.

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Calendar Lines 4-6

Case Name: Alafi, et al. v. Cohen, et al.

Case No.: 18CV333075

After full consideration of the evidence, the separate statements submitted by the

parties, and the authorities submitted by each party, the court makes the following rulings:

According to the allegations of the second amended complaint (“SAC”), in late 2015

and early 2016, defendant Stanley N. Cohen (“Cohen”) told plaintiffs Moshe Alafi (“Moshe”)

and Chris Alafi (“Chris”) that he and defendant Tzu-Hai Cheng (“Cheng”) that he had

discovered a cure for Huntington’s Disease, and possibly, other nucleotide repeat diseases as

well, such as amyotrophic lateral sclerosis, and muscular dystrophy. (See SAC, ¶ 14.) Cohen

represented that the small molecule, “NU 106” or “HD 106,” passes through the blood/brain

barrier, and decreases the aggregation of the mutant protein, and the oral delivery of the

molecule, coupled with a non-invasive cell-based biomarker PBMC assay, could demonstrate

the efficacy of the treatment, and would expedite FDA approval for the treatment. (See SAC, ¶

14.) Cohen also represented that they were “almost done” with the preparation of diagnostics

for patient selection for clinical trials and demonstrating the efficacy of the treatment in those

patients, and in early 2016, Cohen represented that, even on a “quite conservative” timeline,

treatment would be approved by the FDA for clinical trials on human beings beginning in Q2

2017. (See SAC, ¶¶ 14-15.) Cohen also told Moshe and Chris (collectively, “the Alafis”) that

by simply resenting the data of a brief study in a mouse model of HD, together with already

existing data from past psoriasis clinical trials of NU 106 and toxicity studies from that time,

would permit him to file an Investigational New Drug (“IND”) application with the FDA,

avoid any need for further preclinical studies, and obtain approval to proceed to clinical studies

in Huntington’s Disease patients in a matter of a few months. (See SAC, ¶ 16.) Defendants

Cohen and Chang (collectively, “Defendants”) knew that the Alafis would rely on Cohen’s

statements, and also knew that Cohen, as both a prominent scientist at a leading university and

a decades-long friend of Moshe, the Alafis would place particular reliance on his

representations. (See SAC, ¶ 17.) Cohen stated that the company he and Cheng had formed to

develop this product, Nuredis, Inc. (“Nuredis”), had one competitor, Ionis Pharmaceuticals,

which was not a meaningful competitor because its product was inferior to the HD 106

molecule. (See SAC, ¶ 18.) Cohen represented to the Alafis that if they did not make an

immediate investment of $20 million, they would lose out to the many other investors who

were clamoring to invest with Defendants. (See SAC, ¶ 19.) Cohen offered to plaintiffs

Moshe, Chris, Alafi Capital Company, LLC and the Christopher D. Alafi Family Trust

(collectively, “Plaintiffs”), a 20% interest in Nuredis, in exchange for a $20 million investment.

(See SAC, ¶ 20.) Defendants assured the Alafis that the Board of Directors would consist of

Chris, Cohen, Chang and an experienced biotech investor close to the Alafis, Rory Riggs. (See

SAC, ¶ 21.) However, the representations were false: Defendants had not discovered a cure

for HD or other diseases; they had no valid basis for asserting that the HD 106 molecule had

sufficient safety and efficacy to permit the drug compound to move into the human clinical

trials stage or that the FDA would allow clinical trials to proceed without significant and time-

consuming preclinical studies; Defendants had not prepared the diagnostics for identifying

Huntington’s Disease patients for clinical trials or demonstrating efficacy of treatment;

Defendants had not developed a PMBC assay that could demonstrate efficacy of the treatment;

Defendants did not have any other investors ready or willing to make an investment in the

company; and, Ionis Pharmaceuticals was, in fact, far ahead of Nuredis in its development,

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rapidly advancing towards human clinical trials; Defendants failed to advise the Alafis

regarding other competitors such as WaVe Life Sciences, whose development was so far

advanced that they company was able to begin conducting clinical trials on two HD drugs in

the second quarter of 2017 and is currently in an advanced stage of those trials. (See SAC, ¶¶

22-25.) Defendants also failed to disclose that HD 106 had, in fact, been used decades earlier

to treat psoriasis, and excessive toxicity problems with the molecule, including resultant fatal

thromboembolic cardiac conditions, caused the molecule to be pulled from the market, and

thus, the FDA would require extensive toxicity studies and a demonstration of proof of efficacy

of the molecule in significantly reducing toxic protein aggregation prior to any clinical trials to

be approved. (See SAC, ¶ 26.) Based on Defendants’ misrepresentations, Plaintiffs invested

$20 million on July 26, 2016. (See SAC, ¶ 27.) Defendants continued to make further

misrepresentations and hide negative test results. (See SAC, ¶¶ 28-33.) However, using their

majority shareholder status, Defendants operated the company for their own personal benefit,

causing Nuredis to: remove Riggs as a director without cause since he was interfering with

their ability to funnel monies from Nuredis, pay Defendants exorbitant bonuses, elaborate

travel and accommodation expenses and undisclosed advisory fees, and hire Cohen’s mistress,

Duan, as an overpaid consultant, neither disclosing the nature of Cohen’s relationship with

Duan, nor the terms or salary contained in the agreement, nor the fact that Duan was allowed to

set her own compensation. (See SAC, ¶¶ 39-68.) Defendants also blocked efforts to fill

positions with drug development experience, and caused the CEO to be terminated so as to

protect their personal interests rather than the interests of Nuredis. (See SAC, ¶¶ 39-42.)

Ultimately, the HD 106 program was discontinued, but as Nuredis still had $10.6 million of the

Alafi investment, on September 14, 2018, Cohen announced that he and Chang would simply

compel a liquidation of Nuredis and thereby pocket their pro rata shares of the remaining

money. (See SAC, ¶¶ 36-37, 70.) On May 20, 2019, Plaintiffs filed the SAC against

Defendants, asserting causes of action for:

1) Fraudulent inducement;

2) Fraudulent concealment;

3) Securities fraud in violation of Corporations Code § 25401;

4) Unfair competition;

5) Common law unfair competition;

6) Negligent misrepresentation;

7) Breach of fiduciary duty; and,

8) Reformation of contract due to mutual mistake.

Defendant Cheng moves for summary judgment as to the FAC on the grounds that he

made no material misrepresentation or omission to Plaintiffs, did not assist or encourage any

misrepresentation to Plaintiffs, did not owe a fiduciary duty to Plaintiffs as a shareholder, and

did not breach either the duty of care or duty of loyalty. Additionally, Cohen moves for

summary adjudication of the seventh cause of action for breach of fiduciary duty on the ground

that he did not owe fiduciary duty owed to Plaintiffs in his capacity as a shareholder and did

not breach either the duty of care or duty of loyalty. Alternatively, Defendants move for

summary adjudication of the seventh cause of action on the ground that no fiduciary duty was

owed by them to Plaintiffs in their capacity as shareholders.

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Defendants’ burden on summary judgment

“A defendant seeking summary judgment must show that at least one element of the

plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause

of action. … The burden then shifts to the plaintiff to show there is a triable issue of material

fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98

Cal.App.4th 66, 72; internal citations omitted; emphasis added.)

“The ‘tried and true’ way for defendants to meet their burden of proof on summary

judgment motions is to present affirmative evidence (declarations, etc.) negating, as a matter of

law, an essential element of plaintiff’s claim.” (Weil et al., Cal. Practice Guide: Civil

Procedure Before Trial (The Rutter Group 2007) ¶ 10:241, p.10-91, citing Guz v. Bechtel

National Inc. (2000) 24 Cal.4th 317, 334; emphasis original; see also Oakland Raiders v.

National Football League (2005) 131 Cal.App.4th 621, 629 (stating that “[t]he moving party

‘bears the burden of persuasion that there is no triable issue of material fact and that he is

entitled to judgment as a matter of law’”), quoting Aguilar v. Atlantic Richfield Co. (2001) 25

Cal.4th 826, 850; see also Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 100 (Sixth District

stating same).) “The moving party’s declarations and evidence will be strictly construed in

determining whether they negate (disprove) an essential element of plaintiff’s claim ‘in order

to avoid unjustly depriving the plaintiff of a trial.’” (Id. at § 10:241.20, p.10-91, citing Molko

v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107.)

“Another way for a defendant to obtain summary judgment is to ‘show’ that an

essential element of plaintiff’s claim cannot be established. Defendant does so by presenting

evidence that plaintiff ‘does not possess and cannot reasonably obtain, needed evidence’

(because plaintiff must be allowed a reasonable opportunity to oppose the motion.) Such

evidence usually consists of admissions by plaintiff following extensive discovery to the effect

that he or she has discovered nothing to support an essential element of the cause of action.”

(Id. at ¶ 10:242, p.10-92, citing Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854-

855.)

I. CHENG’S MOTION FOR SUMMARY JUDGMENT

Defendant Cheng moves for summary judgment on the ground that Plaintiffs cannot

demonstrate any causes of action against him because he “neither misrepresented nor

concealed any material facts to Plaintiffs to induce them to make their investment in Nuredis,

nor did he aid and abet any such conduct.” (See Defs.’ memorandum of points and authorities

in support of motion for summary judgment (“Defs.’ memo”), pp.12:23-28, 13:1-2.) In

support of the motion, Cheng presents portions of Moshe’s deposition testimony, portions of

Chris’ deposition testimony, and portions of Cheng’s deposition testimony. (See evidence

cited by Defs.’ separate statement in support of motion for summary judgment, undisputed

material facts nos. (“UMFs”) 1-4, citing Moshe’s deposition, p.78:5-26, Chris deposition,

pp.151:1-11, 156:7-25, 157:1-25, 158:1-24, Cheng’s deposition, pp.24:24-25, 25:1-25, 26:1-4,

36:10-25, 37:1-25, 38:1-25, 39:1-10.) Cheng relies on four purportedly undisputed material

facts: 1) Before Plaintiffs’ investment in Nuredis, Dr. Cheng made no material false

statements to them about their potential investment in Nuredis; 2) prior to early 2016, Dr.

Cohen had never mentioned either Moshe or Chris Alafi to Dr. Cheng in any context; 3) Dr.

Cheng was unaware of any purported plan by Dr. Cohen to cause Plaintiffs to invest in

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Nuredis; and, 4) there is no evidence that Dr. Cheng provided assistance or encouragement to

Dr. Cohen in connection with any purported attempt to defraud Plaintiffs. (See UMFs 1-4.)

Here, Moshe and Chris testifiy that they did not have any communications with Cheng

prior to investing in Nuredis. However, the lone evidence cited by Cheng in his separate

statement to demonstrate that he was unaware of any purported plan to cause Plaintiff to invest

in Nuredis is his deposition testimony in which he merely stated that: he didn’t know the

details of what Cohen told the Alafis, but Cohen shared Defendants’ research on HD106 with

them, Cohen and Moshe were friends, and Moshe was aware of Defendants’ cell paper and the

experiment result published in PLOS Genetics. Cheng’s evidence does not address any alleged

misrepresentations regarding Nuredis’ competitors, or Defendants’ progress in its research, or

the prior negative toxicity problems and resultant fatal thromboembolic cardiac conditions

associated with HD 106. Moreover, Cheng does not cite to any evidence in his separate

statement, such as discovery responses or an admission, to support his material fact that

Plaintiffs lack any evidence that Cheng provided assistance or encouragement to Cohen in

connection with any purported attempt to defraud Plaintiffs. (See Professional Collection

Consultants v. Lauron (2017) 8 Cal.App.5th 958, 965 (Sixth District stating that “[a] defendant

cannot ‘simply point out that the plaintiff does not possess, and cannot reasonably obtain,

needed evidence [citation], but ‘must ‘support’ the ‘motion’ with evidence’”); see also Lona v.

Citibank, N.A. (2011) 202 Cal.App.4th 89, 111 (Sixth District stating that defendants “failed to

meet their burden on summary judgment to show that Lona had no evidence that supported his

claims… [because defendants] did not present the type of evidence necessary to demonstrate

that Lona did not possess and could not reasonably obtain, needed evidence”).) (See UMF 4.)

Cheng fails to meet his initial burden of persuasion that there is no triable issue of

material fact and that he is entitled to judgment as a matter of law. Accordingly, the burden

does not shift to Plaintiffs to demonstrate the existence of a triable issue of material issue of

fact, and Cheng’s motion for summary judgment is DENIED.

In light of the above ruling, it is unnecessary to rule on Cheng’s objections to Plaintiffs’

evidence in opposition to his motion.

II. DEFENDANTS’ MOTION FOR SUMMARY ADJUDICATION

Defendants move for summary adjudication of the seventh cause of action for breach of

fiduciary duty on the grounds that Plaintiffs can demonstrate neither any fiduciary duty owed

by Defendants in their capacity as shareholders nor any breach of such a fiduciary duty.

There is no breach of fiduciary duty by Defendants in their capacity of a purported

majority shareholder for their concealment or failure to disclose material information

concerning the Plaintiffs’ investment in Nuredis.

Defendants first argue that Defendants cannot have breached their fiduciary duty as

majority shareholders due to their failure to disclose crucial facts which would have

significantly altered Plaintiffs’ investment decision, because Nuredis did not exist until the

Alafis’ investment, and “[p]rior to Nuredis’ formation on April 22, 2016, there was no

company and thus no shareholders, majority or otherwise.” (Defs.’ memo, p.16:13-21.)

Defendants do not assert that they would not ordinarily owe some sort of fiduciary duty to

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Plaintiffs for their failure to disclose material facts prior to Plaintiffs’ investment; they instead

assert that they could not owe Plaintiffs a duty as majority shareholders prior to the formation

of the company. Defendants also note that the amended and restated certificate of

incorporation of Nuredis includes an exculpatory clause for directors. (See Defs.’ memo,

p.15:23-24, fn.8.) Here, the exculpatory clause of the certificate of incorporation is unlikely to

apply to the duty of honesty and integrity, and Defendants do not cite to any case suggesting

otherwise; nevertheless, as Defendants argue, the seventh cause of action alleges that the

breach of fiduciary duty is premised on the breach of Defendants’ fiduciary duties owed as

majority shareholders. To the extent that Plaintiffs seek to hold Defendants accountable for the

breach of fiduciary duty in their capacity as directors, joint venturers or other basis, it does not

appear that Plaintiffs have yet sought leave to amend the cause of action to allege such basis

for liability. The Court agrees that the concealment of, or failure to disclose, material

information solely within the Defendants’ knowledge that would materially affect Plaintiffs’

decision to invest in Nuredis is not related to the fiduciary duty of a majority shareholder.

“Stockholders in Delaware corporations have a right to control and vote their shares in their

own interest.” (Bershad v. Curtiss-Wright Corp. (Del. 1987) 535 A.2d 840, 845.) “They are

limited only by any fiduciary duty owed to other stockholders… [i]t is not objectionable that

their motives may be for personal profit, or determined by whim or caprice, so long as they

violate no duty owed other shareholders.” (Id.) Here, any decision to invest in Nuredis is not

associated with the right to control or vote shares in one’s interest.

Defendants meet their initial burden to demonstrate that they do not individually own a

majority share in Nuredis and did not form a control group such that they owe a

fiduciary duty to Plaintiffs; however, in opposition, Plaintiffs demonstrate the existence of

a triable issue of material fact as to the existence of such a fiduciary duty.

Defendants also argue that they did not owe a duty to Plaintiffs as majority

shareholders because they both owned 40% of Nuredis stock and did not form a control group.

It is not disputed that both Cohen and Chang each owned a 40% interest in Nuredis. (See Pls.’

separate statement of undisputed material facts, no. 5, subpara. c (stating that Defendants’

combined ownership interest was 98% at formation, and 80% after Plaintiffs’ investment”).)

However, “Delaware case law has recognized that a number of shareholders, each of whom

individually cannot exert control over the corporation (either through majority ownership or

significant voting power coupled with formidable managerial power), can collectively form a

control group where those shareholders are connected in some legally significant way-e.g., by

contract, common ownership, agreement, or other arrangement-to work together toward a

shared goal.” (Frank v. Elgamal (Del. Ch., Mar. 30, 2012, No. CIV.A. 6120-VCN) 2012 WL

1096090, at *8; see also Dubroff v. Wren Holdings, LLC (Del. Ch., Oct. 28, 2011, No. CIV.A.

3940-VCN) 2011 WL 5137175, at *7 (stating same); see also In re Crimson Exploration Inc.

Stockholder Litigation (Del. Ch., Oct. 24, 2014, No. CIV.A. 8541-VCP) 2014 WL 5449419, at

*15 (stating “multiple stockholders together can constitute a control group, with each of its

members being subject to the fiduciary duties of a controller… [t]he alleged members of a

control group, however, must be ‘connected in some legally significant way’—such as ‘by

contract, common ownership, agreement, or other arrangement—to work together toward a

shared goal’”); see also In re Hansen Medical, Inc. Stockholders Litigation (Del. Ch., June 18,

2018, No. CV 12316-VCMR) 2018 WL 3025525, at *5.) “The law does not require a formal

written agreement, but there must be some indication of an actual agreement.” (In re Crimson

Exploration Inc., supra, 2014 WL 5449419, at *15; see also In re Hansen Medical, Inc., supra,

2018 WL 3025525, at *5 (stating same).) Defendants’ lone material fact in support of their

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assertion that they did not form a control group is that they “did not enter into an agreement to

act or vote together.” (See UMF 6; see also Defs.’ memo, pp.17:9-28, 18:1-7, citing to UMF

6.) In support of this material fact, Defendants cite to their respective declarations.

Defendants meet their initial burden to demonstrate that they did not owe a fiduciary duty to

Plaintiffs as they did not individually own a majority share of Nuredis, and they present

evidence demonstrating that they did not enter into an agreement to act or vote together.

In opposition, however, Plaintiffs present Cohen’s deposition testimony in which he

cannot recall any vote where Defendants did not vote together, an email from Cohen in which

he agreed to having Rory Riggs as a member of the Board of Directors on behalf of both

Defendants without discussing the matter with Cheng, meeting minutes and a document

entitled “Action by written consent of the stockholders of Nuredis, Inc.” in which Cheng and

Cohen, as “holders of majority of outstanding shares of common stock of Nuredis,” executed

the removal of Riggs as a director. (See evidence cited by UMF 6.) Plaintiffs demonstrate the

existence of a triable issue of material fact as to whether Defendants formed a control group

such that they owed Plaintiffs a fiduciary duty.

Defendants’ objections to Plaintiffs’ evidence in opposition, nos. 48, 49 are

OVERRULED. As to the remaining objections, the Court did not rely on the evidence that are

the subject of the remaining objections in determining the existence of a triable issue of

material fact as to whether Defendants formed a control group such that they owed Plaintiffs a

fiduciary duty.

Defendants fail to meet their initial burden to demonstrate that Plaintiffs cannot

demonstrate a breach of fiduciary duty.

Lastly, Defendants argue that they are entitled to summary adjudication of the seventh

cause of action for breach of fiduciary duty because Plaintiffs can establish neither the duty of

care nor the duty of loyalty. (See Defs.’ memo, pp.18:8-25, 19:1-28, 20:1-22.) In support of

their argument, Defendants provide the following material facts: Chris approved the

compensation packages offered to Cohen and Chang (see UMF 7); Nuredis hired qualified

employees, including a Vice President of Nonclinical Development, an Operations Consultant,

a Regulatory Consultant and a Medical Consultant (see UMF 8); and, with the approval of the

Nuredis board including Chris, Nuredis decided to suspend development of HD106 in order to

focus on the development of alternative compounds (see UMF 9). Defendants do not address

the allegations that Defendants caused Nuredis to hire Cohen’s mistress as an overpaid

consultant, neither disclosing the nature of Cohen’s relationship with Duan, nor the terms or

salary contained in the agreement, nor the fact that Duan was allowed to set her own

compensation. Defendants also fail to address the allegations that they caused Nuredis to

remove Riggs as a director without cause since he was interfering with their ability to funnel

monies from Nuredis, and caused the CEO to be terminated so as to protect their personal

interests rather than the interests of Nuredis. Accordingly, Defendants fail to meet their initial

burden to demonstrate that Plaintiffs cannot establish a breach of any fiduciary duty owed to

them by Defendants.

Accordingly, the motion for summary adjudication of the seventh cause of action is

DENIED.

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As Defendants fail to meet their initial burden, it is therefore unnecessary to address

Defendants’ objections to evidence presented by Plaintiff in opposition to the motion as cited

in their opposing separate statement in UMFs 7-9.

III. PLAINTIFFS’ MOTION TO STRIKE DEFENDANTS’ REPLY BRIEF

Plaintiffs move to strike portions of the reply brief, asserting that these portions

“improperly raise new arguments for the first time in the Reply.” (Pls,’ notice of motion to

strike reply brief, p.1:13-19.) As stated above, Cheng’s motion for summary judgment and

Defendants’ alternative motion for summary adjudication are denied. These portions of the

reply brief did not affect the Court’s ruling. Moreover, Plaintiffs did file a sur-reply.

Plaintiffs’ motion to strike is DENIED in its entirety.

IV. NON-PARTY CHDI FOUNDATION’S MOTION TO SEAL RECORDS

Non-party CHDI Foundation (“CHDI”) is a privately-funded, not-for-profit biomedical

research organization that supports basic, applied and clinical research aimed at finding

diagnoses, treatments, cures and preventions of Huntington’s disease. CHDI management

provides strategic scientific direction and management to its network of over 600 researchers in

academic and industrial laboratories around the world by providing HD domain knowledge,

reagents, protocols, animal models or funding. CHDI seeks to bring the right partners together

to identify and address critical scientific issues to increase the understanding of HD and hasten

the development of therapeutic approaches to clinical evaluation. CHDI encourages the

sharing of pre-publication data and findings on a confidential basis as peer review and formal

scientific publication takes time; however, CHDI does not generally disseminate or publish

information relating to the specific research projects it funds or the amount of funds it has

contributed to any specific research program or project. CHDI moves to seal certain

documents, in an effort to protect its private financial information, its internal communications,

and the names of the contract research organizations with whom CHDI Foundation worked to

attempt to validate the research results of Cheng and Cohen. The motion is not opposed.

Legal standard

“The public has a First Amendment right of access to civil litigation documents filed in

court and used at trial or submitted as a basis for adjudication.” (Savaglio v. Wal-Mart Stores,

Inc. (2007) 149 Cal.App.4th 588, 596, citing NBC Subsidiary (KNBC–TV), Inc. v. Super. Ct.

(Locke) (1999) 20 Cal.4th 1178, 1208-1209, fn. 25.) “Substantive courtroom proceedings in

ordinary civil cases, and the transcripts and records pertaining to these proceedings, are

‘presumptively open.’” (Savaglio, supra, 149 Cal.App.4th at p. 597, quoting NBC, supra, 230

Cal.4th at p. 1218.) “Therefore, before a trial court orders a record sealed, it must hold a

hearing and make findings that (1) there is an overriding interest supporting sealing of the

records; (2) there is a substantial probability that absent sealing, such interest will be

prejudiced; (3) the sealing order is narrowly tailored to serve the overriding interest; and (4) a

less restrictive means of meeting that interest is not available.” (Savaglio, supra, 149

Cal.App.4th at p. 597, citing NBC, supra, 230 Cal.4th at pp.1217-18.) “These standards are now

embodied in [the] Rules of Court.” (Savaglio, supra, 149 Cal.App.4th at p. 597.)

Rule of Court 2.551 provides different mechanisms for sealing. If the proponent of a

particular document wishes to file it under seal, that proponent may file a motion or application

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to do so that “must be accompanied by a memorandum and a declaration containing facts

sufficient to justify the sealing.” (Cal. Rules of Court, rule 2.551(b)(1).) The evidence and

reasoning must be sufficient to establish the overriding interest and the necessity of sealing; a

confidentiality agreement or “broad allegations of harm, bereft of specific examples or

articulated reasoning” are inadequate. (McNair v. National Collegiate Athletic Association

(2015) 234 Cal.App.4th 25, 35-36.) Alternatively, if the proponent of the document does not

seek to file it under seal but must, nevertheless, comply with a confidentiality agreement or

protective order for documents produced in discovery, it may lodge and file the documents as

specified in Rule 2.551(b)(3)(A) and provide written notice to the party who produced the

documents that the unredacted documents conditionally lodged under seal will be transferred to

the public file unless the producing party timely moves for a sealing order. (Cal. Rules of

Court, rule 2.551(b)(3)(A)(iii).) If the producing party fails to timely file a motion or seek an

extension of time to do so, “the clerk must promptly transfer [the unredacted documents lodged

conditionally under seal] from the… secure electronic file to the public file.” (Cal. Rules of

Court, rule 2.551(b)(3)(B).)

Whether a proponent moves to seal in the first instance or the producing party moves to

seal documents for which it has been provided notice under Rule 2.551(b)(3)(A), the denial of

a motion to seal precludes the documents from remaining conditionally lodged under seal and

publicly filed with redactions. (See Cal. Rules of Court, rule 2.551(b)(6).) Instead, within ten

days of the order denying the motion to seal, the party may notify the court that the lodged

documents may be unsealed. (Id.) In other words, the moving party may acquiesce to the

ruling and decide to publicly-file and, in turn, rely upon the documents for the purpose of

adjudicating the merits of the action. Alternatively, if the moving party fails to provide this

notice to the court within ten days, “the clerk must (1) return the lodged record to the moving

party if it is in paper form or (2) permanently delete the lodged record if it is in electronic

form.” (Cal. Rules of Court, rule 2.551(b)(6); see also Regents of University of California v.

Super. Ct. (Reuters America LLC) (2013) 222 Cal.App.4th 383, 409 (stating that “Rule

2.551(b)(6) is clear: when the court denies or denies in part the request to seal, and the

submitting party elects not to have its provisionally sealed documents become a part of the

record, the court must return the lodged documents as required by rule 2.551(b)(6)”).) When

the unredacted documents are returned or deleted, it is as though they never existed; they are

neither part of the record nor subject to consideration by the court in addressing the merits of

the dispute. (See Regents, supra, 222 Cal.App.4th at p. 409.) And so, although it is not unusual

for a motion to seal to be considered at the same time as or after a court considers the merits of

a dispute, a court that considers the merits before determining whether matters may be filed

under seal “bears the risk that it may have to reevaluate the merits of the motion or petition if

its decision was based on provisionally sealed material that the submitting party elects not to

refile.” (Id.)

Subject records

CHDI seeks to seal:

Reference to the amount of money CHDI spent with two contract research

organizations trying to validate the research results of Cohen and Cheng in

Plaintiffs’ opposition and opposing separate statement;

9

A sentence from a one page internal CHDI internal management email from

exhibit M of the Nadel declaration;

Three emails totaling 11 pages—exhibits N, O and P of the Nadel declaration;

Two reports that CHDI received from its contract research organizations—

exhibits Q and S of the Nadel declaration; and,

Limited information contained in the transcript of the deposition of Jonathan

Bard, the Director of Molecular Biology for CHDI, whose testimony relates to

the amount of money CHDI spent attempting to validate the research results of

Cheng and Cohen, the references to the two contract research organizations, and

the specific research results those contract research organizations provided to

CHDI as reflected in their reports—exhibit R of the Nadel declaration.

Analysis

To establish the overriding interest and the necessity of sealing, CHDI presents the

declaration of Robi Blumenstein, the president of CHDI. (See Blumenstein decl. in support of

CHDI’s motion to seal (“Blumenstein decl.”), ¶ 1.) In his declaration, he: identifies the

specific information subject to sealing (see Blumenstein decl., ¶¶ 5-6, 16-20, exhs. 4-10); states

that these documents were produced to Plaintiffs pursuant to a subpoena and their decision to

mark the documents as “confidential” pursuant to the terms of stipulated protective order

between Defendants and Plaintiffs (see Blumenstein decl., ¶ 15); provides a background of

non-party CHDI—such as how CHDI funds and works with a network of more than 600

academic and industrial HD researchers, utilizes the work of CHDI management staff scientists

to manage CHDI’s own internal drug programs through its collaborations at contract research

organizations, works in partnership with biotech and pharmaceutical companies to develop

drugs for treating HD, acts as a collaborative enabler for any research group that wants to work

on HD by making resources such as reagents, antibodies, mouse models, and clinical samples

freely available to the HD research community, works to building clinical capacity so that it

and the wider HD research community can quickly progress to clinical trials once a promising

potential drug is ready, and provides strategic scientific direction and management to ensure

that CHDI’s and researchers’ goals remain in focus (see Blumenstein decl., ¶¶ 7-11); CHDI’s

data, reagents and biomaterials sharing policy, including sharing of pre-publication data,

findings and insights on a confidential basis (see Blumenstein decl., ¶ 12); CHDI’s publication

policy, expecting those supported by CHDI to promptly publish or otherwise disseminate all

valid data, conclusions, outcomes and other results (see Blumenstein decl., ¶ 13); CHDI’s

policy to not disseminate or publish information relating to the specific research programs or

projects it funds, or the amount of funds it has contributed to any specific research program or

project (see Blumenstein decl., ¶ 14); provides details regarding the nature of the harm

threatened by disclosure as to each document (see Blumenstein decl., ¶¶ 16-20); and identifies

the countervailing interest as the right of public access to this information and documentation,

states that CHDI’s overriding interest supports the sealing of the information and

documentation, and states that the proposed sealing as detailed above is narrowly tailored and

no less restrictive means exist to achieve the protection of CHDI’s overriding interest (see

Blumenstein decl., ¶ 21). With regards to the research organizations, Blumenstein states that

its work with contract research organizations is governed by a Confidentiality Agreement that

the work will only be disclosed to CHDI affiliates, officers, directors, employees,

representatives, consultants, agents and advisors, or as required by law, and that the publication

of this previously unpublished information will result in contract research organizations,

10

including the two identified research organizations, declining to continue working with CHDI

in the future on this basis. (See Blumenstein decl., ¶ 19.)

Here, as to the information regarding the amounts of monies funded to the two contract

research organizations, Blumenstein’s declaration is more generalized than what is preferred.

Blumenstein does not explicitly state that researchers are prohibited from discussing the

amount of funding received from CHDI with other researchers, such as by the enforcement of

an NDA. However, as previously stated, Blumenstein does discuss a Confidentiality

Agreement, and the implication is that pursuant to that Confidentiality Agreement, researchers

are indeed prohibited from disclosing such information regarding the funding of research

programs and projects as such disclosure would impede progress between researchers that

would run counter to CHDI’s mission to “ensur[e] the shortest possible time for getting

effective therapeutics to Huntington’s disease patients.” Accordingly, non-party CHDI has met

its burden to specifically detail the facts sought to be withheld and reasons for withholding

them; its evidence and reasoning is sufficient to establish the overriding interest and the

necessity of sealing. (See H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 894 (stating that

to identify and weigh the competing interests and concerns so as to come to a reasoned

decision about sealing records, the moving party is required to “(1) identify[] the specific

information claimed to be entitled to such treatment; (2) identify[] the nature of the harm

threatened by disclosure; and (3) identify[] and account[] for countervailing considerations…

[t]he burden of presenting information sufficient to accomplish the first two steps is logically

placed upon the party seeking the sealing of the documents, who is presumptively in the best

position to know what disclosures will harm him and how…the party seeking to seal

documents, or maintain them under seal, must come forward with a specific enumeration of the

facts sought to be withheld and specific reasons for withholding them”).) CHDI’s motion to

seal is GRANTED.

The Court will prepare the Order.

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Calendar line 5

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Calendar line 6

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Calendar line 7 Case Name: Triple B Investments, LLC v. Don Jensen, et al.


I. Background

This action arises from a dispute over real property located at 138 Wood Road in Los Gatos,

California (the “Property”).

Defendants Don Jensen and Ron Sherrod were the managing members of defendant RADE

Properties, LLC (“RADE”). According to the allegations in the second amended complaint

(“SAC”) of plaintiff Triple B Investments, LLC (“Plaintiff”), in March 2015, RADE contracted

with then owners Paul and Toni Liccardo to purchase the Property for $2,695,000. Plaintiff

alleges an unspecified grant deed described three constituent parcels, namely an easement, a

portion of Wood Road, and another parcel that was the “substance of the property conveyed.”

(SAC, ¶ 11.) Plaintiff and RADE planned to renovate and resell the Property within 18 months

of purchase with Plaintiff financing the renovation. (SAC, ¶ 13.)

As planned, RADE obtained financing to purchase the Property and recorded a first deed of

trust for the lender’s benefit in October 2015. (SAC, ¶ 15.) Then, Plaintiff extended a loan to

RADE in the amount of $500,000 and a second deed of trust was executed to secure that loan.

(SAC, ¶ 16.) According to Plaintiff, its deed of trust contains an error as it lists an assessor’s

parcel number of 510-47-047—which allegedly does not correspond to any existing property—

and does not list the same parcel numbers used for the first deed of trust, namely 510-47-027

and 510-47-043. (SAC, ¶ 17.) Additionally, while no legal description of the Property was

appended to Plaintiff’s deed of trust, the legal description set forth in the body of the deed of

trust itself was the same as that which appears in the grant deed. (SAC, ¶ 17.) Plaintiff believes

this discrepancy in parcel numbers resulted from a lot line adjustment performed by the City of

Los Gatos at RADE’s request and subsequently documented in two grant deeds recorded in

January 2017. (SAC, ¶ 18.)

In June 2017, when RADE had not timely renovated the Property within 18 months, RADE

and its members (Jensen and Sherrod) approached Plaintiff about the need for additional

financing to complete the project. (SAC, ¶¶ 20–22.) RADE needed $1,000,000 and found a

lender to provide the same, but it informed Plaintiff that to obtain the financing it would be

necessary to subordinate Plaintiff’s deed of trust to that of the new lender. (SAC, ¶¶ 21–22.)

Plaintiff acquiesced, and defendant Lawyers Title Company recorded the subordination

agreement as well as the deed of trust for the new lender. (SAC, ¶¶ 23–24.) Plaintiff alleges

that while the subordination agreement itself does not list any assessor’s parcel numbers, an

exhibit is appended thereto that contains the legal description from the grant deed (described

above) but that also lists the post-adjustment parcel numbers of 510-47-027 and 510-47-043.

(SAC, ¶ 23.) Plaintiff alleges this deed of trust for the new lender also contained issues with

the property description and listed parcel numbers. (SAC, ¶ 24.) According to Plaintiff, RADE,

Jensen, and Sherrod altered the subordination agreement and deed of trust after the fact and

took out a greater loan than was agreed-upon in the amount $1,250,000. (SAC, ¶ 26.) Plaintiff

alleges that defendant Lawyers Title Company should have but failed to catch these

discrepancies and then recorded the improper documents. (SAC, ¶ 26.) Had Plaintiff known the

loan secured by the deed of trust would be $1,250,000 and been aware of the other

discrepancies, it would not have agreed to subordinate its lien. (SAC, ¶ 27.)

Eventually, in September 2017, RADE sold the Property to nonparties Lily Frenkel and Justin

Draa for $2,400,000; it used the proceeds to pay off the first mortgage through which it

financed the purchase of the Property. (SAC, ¶ 28.) As part of this transaction, defendant

CornerStone Title Company asked Plaintiff to execute a partial reconveyance and substitution

of trustee. (SAC, ¶ 30.) Plaintiff alleges that after its managing member Peng Zhang signed the

document, it was modified and labeled as a full reconveyance. (SAC, ¶ 31.) Plaintiff alleges

that another lienholder also executed a reconveyance and that new deeds of trusts were

prepared for it and this other lienholder, but that these deeds of trust were not recorded

contemporaneously such that Plaintiff lost its right of priority. (SAC, ¶ 36.) According to

Plaintiff, its interest was thereafter eliminated when this other lienholder foreclosed and

acquired the Property by credit bid at a foreclosure sale. (SAC, ¶ 37.)

Plaintiff asserts causes of action against RADE, Jensen, Sherrod, CornerStone, and Lawyers

Title Company for: (1) breach of contract (against RADE); (2) breach of fiduciary duty

(against RADE); (3) fraud (against RADE, Sherrod, and Jensen); (4) contractual indemnity

(against RADE); (5) violation of California’s unfair competition law (against all defendants);

and (6) negligence (against CornerStone and Lawyers Title Company).

Currently before the Court is CornerStone’s demurrer to the fifth and sixth causes of action on

the ground of failure to state facts sufficient to constitute a cause of action. It filed a request for

judicial notice in support of its demurrer.

II. Request for Judicial Notice

CornerStone requests judicial notice of several transaction documents, including a

reconveyance previously submitted to the Court in connection with an evidentiary proceeding

as well as a demand for full payment and disbursement of private lender payoff. CornerStone’s

request is problematic because it is essentially presenting evidence on disputes issues and does

not establish that the documents are proper subjects of judicial notice based on the precedent it

cites.

Under some circumstances, a court may take judicial notice of the existence and facial contents

of recorded instruments. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919,

924, fn. 1, citing Evid. Code, § 452, subds. (c) & (h).) This includes the fact of the document’s

recordation, the parties to the transaction, the date the parties executed and recorded the

document, and legally operative language but not disputed statements. (Yvanova, supra, 62

Cal.4th at p. 924, fn. 1, citing Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256,

265.) A court may then rely upon the legal effect of the document as deduced from these facts.

(See Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th

1106, 1117–18.)

Here, judicial notice of the payment demand and disbursement is improper because

CornerStone does not aver and the documents do not reflect on their face that they were

recorded. Additionally, based on the facts alleged, there are disputes over the accuracy and

authenticity of transaction documents. Plaintiff alleges documents were altered after they were

signed. And so, under these circumstances, judicial notice is improper.

As for the reconveyance, while it was previously filed with the Court, a court may not take

judicial notice of the truth of statements in court records when taking judicial notice under

Evidence Code section 452, subdivision (d). (Hamilton v. Greenwich Investors XXVI, LLC

(2011) 195 Cal.App.4th 1602, 1608, fn. 3; accord Sosinsky v. Grant (1992) 6 Cal.App.4th

1548, 1564.) And so, although previously filed with the Court in connection with an

evidentiary proceeding, it is improper to take judicial notice of and rely on the truth of the

statements in the reconveyance. As for whether the reconveyance is otherwise subject to

judicial notice on some other basis, while it was recorded, there is a dispute over its contents.

Plaintiff alleges the document was modified. And, indeed, the document presented by

CornerStone seems—on its face—to have been modified because in its title it appears the

terms partial and full were crossed out and written over several times. Given this dispute over

substance and authenticity, the reconveyance is not a proper subject of judicial notice despite

its recordation.

For these reasons, CornerStone’s request for judicial notice is DENIED.

III. Demurrer

In general, “a complaint must contain ‘[a] statement of the facts constituting the cause of

action, in ordinary and concise language.’” (Davaloo v. State Farm Insurance Co. (2005) 135

Cal.App.4th 409, 415, quoting Code Civ. Proc., § 425.10, subd. (a)(1).) “This fact-pleading

requirement obligates the plaintiff to allege ultimate facts that as a whole apprise[ ] the

adversary of the factual basis of the claim.” (Davaloo, supra, 135 Cal.App.4th at p. 415

[internal quotation marks and citations omitted].) A plaintiff is not ordinarily required to allege

“‘each evidentiary fact that might eventually form part of the plaintiff’s proof….’ [Citation.]”

(Ferrick v. Santa Clara University (2014) 231 Cal.App.4th 1337, 1341.) A demurrer on the

ground of failure to state sufficient facts tests whether the plaintiff alleges each fact essential to

the cause of action asserted. (C.A. v. William S. Hart Union High School Dist. (2012) 53

Cal.4th 861, 873.)

CornerStone argues that Plaintiff does not allege all of the essential elements of its sixth cause

of action for negligence and that, as a consequence, its derivative UCL claim fails as well.

Accordingly, the Court first addresses the sixth cause of action before turning to the fifth cause

of action for violation of the UCL.

A. Sixth Cause of Action

Plaintiff’s sixth cause of action is for negligence. The essential elements of a negligence claim

are duty, breach, causation, and damages. (Melton v. Boustred (2010) 183 Cal.App.4th 521,

529–30.) CornerStone argues that it did not owe Plaintiff any legal duty and that the facts

alleged could not have caused Plaintiff any harm.

CornerStone’s breach and/or causation argument is unpersuasive because it is based on a

premature resolution of a question of interpretation and does not adequately address the

substance of Plaintiff’s claim. CornerStone argues that even accepting that the title of the

reconveyance was modified from partial reconveyance to full reconveyance, this change could

not possibly have caused Plaintiff any harm because the substance of the reconveyance was a

full reconveyance. As a threshold matter, because the Court does not take judicial notice of the

reconveyance based on CornerStone’s presentation, there is not an adequate factual foundation

for CornerStone’s argument. Additionally, CornerStone is prematurely asking the Court to

conclusively adopt its interpretation of the reconveyance as a matter of law in a scenario where

this is impermissible. When a plaintiff asserts a breach of contract claim based on a written

agreement, his or her construction or interpretation of the agreement may and should be

pleaded. (Aragon-Haas v. Family Security Insurance Services, Inc. (1991) 231 Cal.App.3d

232, 239.) “‘So long as the pleading does not place a clearly erroneous construction upon the

provision of the contract, in passing upon the sufficiency of the complaint, [a court] must

accept as correct [a] plaintiff’s allegations as to the meaning of the agreement.’ [Citation.]”

(Ibid.) It is especially improper for a court to sustain a demurrer based on a defendant’s

interpretation of a contract when extrinsic evidence is necessary to determine whether there is

an ambiguity in the agreement and to determine the proper interpretation of the agreement.

(See Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 112–19.) It

follows from these principles that even outside the context of a claim for breach of contract,

CornerStone’s presentation of its own interpretation at this juncture based on its resolution of a

disputed issue of instrument interpretation is premature. CornerStone has not established that

Plaintiff’s interpretation is clearly erroneous. And, there are disputes as to the authenticity of

documents and the regularity of the transaction. Thus, CornerStone’s argument is premature as

presented and based on the particular facts alleged here. Finally, CornerStone seems to proceed

as though the only breach alleged is the modification of the heading on the deed of

reconveyance. But Plaintiff also alleges CornerStone did not properly record the new deeds of

trust that it prepared. And so, CornerStone’s focus on Plaintiff’s one allegation about the

modification of the document is insufficient to establish no negligence claim has been stated in

light of the totality of the facts alleged.

With that said, CornerStone is correct about the limited nature of an escrow holder’s duties. An

escrow holder is an agent and fiduciary of the parties to the escrow who have deposited money

or documents with the escrow holder to be delivered upon the occurrence of some condition.

(Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705,

711.) “The agency created by the escrow is limited—limited to the obligation of the escrow

holder to carry out the instructions of each of the parties to the escrow.” (Ibid.) “If the escrow

holder fails to carry out an instruction it has contracted to perform, the injured party has a

cause of action for breach of contract.” (Ibid.) The escrow holder’s fiduciary duties, like the

contractual duties, emanate from the escrow instruction and its fundamental obligation to

follow them. (Ibid.) No general duty is owed. (Ibid.) “Absent clear evidence of fraud, an

escrow holder’s obligations are limited to compliance with the parties’ instructions.” (Ibid.)

For example, in Summit Financial Holdings, the California Supreme Court held that an escrow

holder did not owe a legal duty to a third-party assignee of a promissory note and deed of trust.

(Summit Financial Holdings, supra, 27 Cal.4th at p. 711.) In that case, neither the original

holder of the note and deed of trust nor the assignee were parties to the escrow for a

refinancing transaction. (Id. at pp. 708–10.) Nevertheless, as part of the transaction, the escrow

holder was instructed to and did pay off the original holder of the note and deed of trust. (Ibid.)

The original holder of the note thereafter failed to remit these proceeds to the assignee. (Ibid.)

The assignee claimed that, despite following the instructions, the escrow holder knew of the

existence of the assignment and breached its legal duty by knowingly paying the original

holder of the note instead of the assignee. (Ibid.) The Court rejected this contention, in part,

because it was at odds with the basic principle that an escrow holder must follow the escrow

instructions. (Ibid.) The Court held no duty was owed to the assignee despite the escrow

holder’s knowledge of the assignment. (Ibid.)

Although Summit Financial Holdings is instructive and supports the general proposition that an

escrow holder does not ordinarily owe a legal duty to third parties, it is not entirely analogous

to the case at bench. And, despite CornerStone’s acknowledgment of the importance of the

Biakanja factors to the determination of whether a legal duty exists (as shown in Summit

Financial Holdings), CornerStone does not apply those factors to the particular facts present

here. And so, CornerStone’s analysis is lacking in some regards. Even so, for the reasons

below, the Court finds the facts alleged are insufficient.

First, as Plaintiff points out, unlike the assignee in Summit Financial Holdings, it did have a

relationship with one of the parties to the escrow (namely RADE) and executed documents in

the course of the sale transaction. Yet, on the other hand, the mere fact that someone has an

interest in the outcome of the transaction does not mean that person is a “party” to the escrow.

(Markowitz v. Fidelity Nat. Title Co. (2006) 142 Cal.App.4th 508, 526.) And so, the facts

alleged are insufficient to show Plaintiff was a party as relevant to the duty analysis.

Additionally, as related to this issue, the California Supreme Court has emphasized the

importance of the escrow instructions to the existence, nature, and scope of an escrow holder’s

duties. (Summit Financial Holdings, supra, 27 Cal.4th at p. 711.) Here, unlike in Summit

Financial Holdings, Plaintiff does not appear to be alleging that CornerStone had a duty to

deviate from the escrow instructions to independently satisfy its duty of care. Rather, Plaintiff

alleges numerous inconsistencies and irregularities in the transaction documents both leading

up to the eventual sale as well as those prepared and recorded by CornerStone. Nevertheless,

Plaintiff has not adequately alleged facts showing the legal duty upon which it relies properly

emanates from those instructions. Indeed, it is not especially clear what Plaintiff believes the

instructions were and how the instructions fit with the alleged irregularities in the execution

and recordation of documents by CornerStone. All of this is to say that while Summit Financial

Holdings is not precisely the same as the scenario presented here, Plaintiff must allege more

facts to show its claim properly arises from the limited duties owed by the escrow holder. The

facts alleged at present are insufficient to show the existence of a legal duty that conforms with

the principles set forth in Summit Financial Holdings and Markowitz. Because the facts alleged

are insufficient to affirmatively show a legal duty was owed by CornerStone, its demurrer to

the sixth cause of action is SUSTAINED with 20 days’ leave to amend.

B. Fifth Cause of Action

CornerStone argues that because Plaintiff’s predicate negligence claim fails, the UCL

claim is subject to demurrer as well. Plaintiff agrees that “when the underlying legal claim

fails, so too will a derivative UCL claim.” (AMN Healthcare, Inc. v. Aya Healthcare Services,

Inc. (2018) 28 Cal.App.5th 923, 950.) As set forth above, Plaintiff’s negligence claim is not

properly pleaded. Consequently, the UCL claim based thereupon is subject to demurrer as well.

The demurrer to the fifth cause of action is, therefore, SUSTAINED with 20 days’ leave to

amend.

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Calendar line 8 Case Name: Wells Fargo Bank, N.A. v. Duque


After full consideration of the evidence submitted by the parties, and the authorities

submitted by each party, the court makes the following rulings:

This is a collection action for monies owed pursuant to a credit card agreement. After

applying for a credit card from plaintiff Wells Fargo Bank, N.A. (“Plaintiff”), defendant

Bernadette A. Duque (“Defendant”) was approved by Plaintiff on December 10, 2015 and was

issued a card from Plaintiff. (See Pl.’s separate statement of undisputed material facts, no.

(“UMF”) 1.) Defendant used the credit card, thereby agreeing to the terms of the credit card

agreement, including the agreement to repay the principal amount lent plus interest thereon.

(See UMF 2.) Defendant made payments of principle and interest on the account through

February 1, 2019; however, after this date, she made no further payments, leaving an

outstanding balance of $7,689.55. (See UMF 6.)

On July 31, 2019, Plaintiff filed a complaint against Defendant asserting causes of

action for breach of contract and common counts.

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Plaintiff’s burden on summary judgment

The moving party bears the initial burden of production to make a prima facie showing

that there are no triable issues of material fact—one sufficient to support the position of the

party in question that no more is called for. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th

826, 850-851.) Plaintiffs moving for summary judgment bear the burden of persuasion that

each element of the cause of action in question has been proved, entitling the party to

judgment. (Code Civ. Proc. § 437c, subd.(p)(1).) Plaintiffs, who bear the burden of proof at

trial by preponderance of evidence, therefore “must present evidence that would require a

reasonable trier of fact to find the underlying material fact more likely than not—otherwise he

would not be entitled to judgment as a matter of law, but would have to present his evidence to

a trier of fact.” (Aguilar, supra, 25 Cal.4th at p.851.) “‘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.’” (Thompson v. Ioane (2017) 11

Cal.App.5th 1180, 1195 (Sixth District case), quoting Code Civ. Proc. § 437c, subd. (p)(1).)

Defendant’s objections to Plaintiff’s evidence

Defendant first objects to the declaration of Carol A. Rowe (“Rowe”), asserting that

“[t]his declarant failed to aver that he has personal knowledge of the facts set forth in his

declaration, or that if called as a witness that he could and would testify competently to the

truth of the factual matters asserted in his declaration.” However, paragraph 1 of the

declaration plainly states “I have personal knowledge of the facts contained in this declaration

and if called as a witness to testify, I could and would do so competently.” (Rowe decl., ¶ 1.)

Objection number 1a is OVERRULED. Defendant also objects to the Rowe declaration,

asserting that she is not a qualified expert. Objection 1b is also OVERRULED. Defendant

also makes a number of objections regarding particular paragraphs of the Rowe declaration.

However, these objections too lack merit and are OVERRULED.

Plaintiff meets its initial burden.

The elements of for a breach of contract “cause of action are the existence of the

contract, performance by the plaintiff or excuse for nonperformance, breach by the defendant

and damages.” (First Commercial Mortgage Co. v. Reece (2001) 89 Cal.App.4th 731, 745.)

“A common count is not a specific cause of action [ ]; rather, it is a simplified form of pleading

normally used to aver the existence of various forms of monetary indebtedness….” (McBride

v. Boughton (2004) 123 Cal.App.4th 379, 394.) “The only essential allegations of a common

count are ‘(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods

sold, work done, etc., and (3) nonpayment.’” (Farmers Insurance Exchange v. Zerin (1997) 53

Cal.App.4th 445, 460.)

In support of its motion, Plaintiff presents the declaration of Rowe, a loan adjustor for

Plaintiff, who states that: she is responsible for monitoring the legal process for credit card

accounts and researches and reviews Plaintiff’s business records and is familiar with the usage

and record keeping systems for Plaintiff, and the process by which information is transmitted

by merchants to Plaintiff (see Rowe decl. in support of motion for summary judgment (“Rowe

decl.”), ¶ 2); she has personally examined the business records relating to Defendant’s account

and used the proper procedures to access and retrieve the account information (see Rowe decl.,

¶ 3); the business records were kept in the system in the ordinary course of business, are relied

on by Plaintiff and cannot be altered or changed once in the system (see Rowe decl., ¶ 4);

Defendant requested a line of credit and filled an application, and in response, Plaintiff

extended the credit line and issued Defendant a credit card on December 10, 2015 (see Rowe

decl., ¶¶ 5-7, exh. A); the credit card agreement and disclosure statement states that

Defendant’s use of the account would constitute acknowledgement and acceptance of the terms

and conditions of the agreement, including finance charges and other fees and charges, and the

definition and consequences of default (see Rowe decl., ¶¶7-8, exh. B); Defendant used the

credit card, thereby agreeing to repay the principal amount plus any applicable interest and

finance charges thereon (see Rowe decl., ¶ 9); Plaintiff mailed monthly statements to

Defendant showing the debits and credits incurred, interest rate for the account, the calculation

of the interest rate on the balance and the minimum payment due and payable for the month

(see Rowe decl., ¶ 10, exh. C); Defendant never disputed a charge, credit or the balance due on

the account with Plaintiff (see Rowe decl., ¶ 11); Defendant made payments of principal and

interest on the account up and through February 1, 2019, the last payment of which was for

$235.00 (see Rowe decl., ¶ 12); Defendant did not make any payments thereafter and a balance

of $7,689.55 remains due and owing (id.); and, Defendant has failed to pay any part of the

$7,689.55 due (see Rowe decl., ¶ 13).

Here, Plaintiff has demonstrated that each element of its causes of action; the burden

thus shifts to Defendant to demonstrate the existence of a triable issue of material fact. (See

Code Civ. Proc. § 437c, subd. (p)(1).)

In opposition, Defendant fails to demonstrate the existence of a triable issue of material

fact.

In opposition, Defendant fails to present any evidence, instead relying on her

objections. Defendant fails to demonstrate the existence of a triable issue of material fact;

accordingly, the motion for summary judgment is GRANTED.

The Court shall prepare the Order.

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Documents

LAW AND MOTION TENTATIVE RULINGS DATE: July …...2020/07/21 · Department 6, Honorable Maureen A. Folan Farris Bryant, Courtroom Clerk 191 North First Street, San Jose, CA 95113