Opinion
G044327
12-27-2011
M. GRANT BETTINGEN et al., Cross-complainants and Appellants, v. RUBICON FINANCIAL, INC., et al., Cross-defendants and Respondents.
Papp & Lemaster-Farrimond and Eric Michael Papp for Cross-complainants and Appellants. Burris, Schoenberg & Walden, Donald S. Burris, Richard E. Walden, and Laura G. Brys for Cross-defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 30-2009-00124138)
OPINION
Appeal from a judgment of the Superior Court of Orange County, David C. Velasquez, Judge. Affirmed in part; reversed in part; and remanded with directions.
Papp & Lemaster-Farrimond and Eric Michael Papp for Cross-complainants and Appellants.
Burris, Schoenberg & Walden, Donald S. Burris, Richard E. Walden, and Laura G. Brys for Cross-defendants and Respondents.
M. Grant Bettingen and Christi Bettingen appeal from a judgment dismissing their 138-page 30-cause of action second amended cross-complaint after a demurrer was sustained without leave to amend on the grounds they failed to state facts sufficient to constitute a cause of action. They contend they adequately alleged every cause of action. We conclude some causes of action were adequately alleged and others either were not or have been abandoned. We reverse the judgment in part and affirm in part.
PROCEDURE
Before setting forth the facts alleged in the second amended cross-complaint, or describing the causes of action alleged therein, we set forth some procedural facts. The cross-complainants and appellants are M. Grant Bettingen, as an individual and as cotrustee of the Bettingen 1999 Trust (the Bettingen Trust), and his wife Christi Bettingen, also as a cotrustee of the Bettingen Trust. (For convenience only we will refer to M. Grant Bettingen as "Bettingen," to his wife as "Christi," and to the appellants collectively as "the Bettingens," unless the context indicates otherwise.) Bettingen was a licensed securities broker who founded and operated a brokerage business called Grant Bettingen, Inc. (GBI); title to all GBI's stock was held by the Bettingen Trust.
The successfully demurring cross-defendants below, and respondents in this appeal, are Rubicon Financial, Inc. (Rubicon), the company that purchased GBI from the Bettingens; GBI; and various employees, officers, and/or directors of both companies including Joseph Mangiapane, Jr., Deborah Scott, Suzanne Herring, Kit Kessler, Terrance Davis, and Todd Vande Hei. Two other named cross-defendants, Matt Brown and Marc Riviello, apparently were self-represented and both filed answers, and they have not appeared in this appeal. (For convenience, we will collectively refer to all the cross-defendants, including those not appearing on this appeal, as "the Defendants" unless the context indicates otherwise.)
The litigation began with Rubicon filing a complaint against the Bettingens (Rubicon Financial, Inc. v. Grant Bettingen et al., Orange County Super. Ct. case No. 30-2009-00124138). Rubicon's complaint was not designated as part of the record on this appeal, but we take judicial notice of its first amended complaint filed July 16, 2009. (Evid. Code, §§ 452, subd. (d); 459, subd. (a).) In it Rubicon sued Bettingen, as an individual and as a trustee of the Bettingen Trust, and GBI for breach of contract, fraud, declaratory relief, breach of the covenant of good faith and fair dealing, and unjust enrichment, arising out of the sale of GBI to Rubicon.
Before Rubicon's complaint was served, the Bettingens filed a complaint against the Defendants (Orange County Super. Ct. case No. 30-2009-00290797). The Bettingens' original complaint was 147 pages long, with another 95 pages of attached exhibits, and contained 31 causes of action. The Defendants (not including Brown and Riviello) filed a demurrer and motion to strike. Before either was ruled upon, the Bettingens filed a first amended complaint (FAC), including exhibits, that was virtually identical to the original. The Bettingens' action was consolidated with the Rubicon action, which was designated as the lead action.
The Defendants filed a demurrer and motion to strike the Bettingens' FAC. The demurrer specifically addressed 27 of the FAC's 31 causes of action (four causes of action were not specifically addressed), demurring to each largely on the grounds there was a defect in or misjoinder of parties, the complaint did not state facts sufficient to constitute a cause of action, and the complaint was uncertain, ambiguous, and/or unintelligible. (Code Civ. Proc., § 430.10, subds. (d), (e) & (f).) They also demurred to the entire FAC on the grounds it was uncertain, ambiguous, and/or unintelligible. (Code Civ. Proc., § 430.10, subds. (d), (e) & (f).)
The trial court sustained the demurrer to the FAC with leave to amend, and ruled the motion to strike was moot. Its minute order directed: "The Bettingens must allege the basis of their standing to sue for breach of contract, or for interference with contract, where there are no facts alleged that they are parties to certain of the contracts. The 10th, 11th, 19th and 20th causes of action are uncertain. There is no cause of action . . . for conspiracy per se. . . . The RICO, shareholder oppression, harassment, discrimination, misrepresentation and fraud causes of action must be pleaded with greater specificity. [Christi] must allege her standing to assert the relief she prays for. The 26th through 31st causes of action must identify which defendants engaged in alleged wrongdoing."
The Bettingens filed essentially the same pleading retitled second amended cross-complaint (SACC), now alleging 30 causes of action. (The FAC's 12th cause of action for conspiracy was omitted from the SACC, the SACC simply titled its 12th cause of action "reserved" and continued the same numbering in the SACC.) The SACC alleged no new facts, but in addition to each cause of action incorporating by reference all the paragraphs from each preceding cause of action, some causes of action which the trial court had found lacking in certainty now contained cross references back to specific paragraphs in the SACC's general allegation section. The SACC referred to the same exhibits that were attached to prior versions, and stated they were incorporated therein by reference, but the copy of the SACC contained in the clerk's transcript does not have any exhibits attached to this final version of the pleading.
The Defendants refiled the same demurrer, which the trial court sustained without leave to amend because the SACC failed to state facts sufficient to constitute a cause of action. At the hearing, the trial court stated while the demurrer did not specifically address every one of the SACC's 30 causes of action, the Defendants' inclusion of a paragraph demurring to the entire SACC on the grounds it was uncertain, ambiguous, and/or unintelligible (Code Civ. Proc., § 430.10, subds. (d), (e) & (f)), "scoops them all up." The court chastised Bettingens's counsel for "fil[ing] a phonebook and tell[ing] me there's a cause of action . . . . [¶] . . . [¶] . . . covering 30 causes of action filling 137 pages of complaint is a search for a needle in a haystack." The court signed a written order dismissing the SACC in its entirety and the Bettingens appealed. Trial on Rubicon's complaint against Bettingen has been stayed pending this appeal.
The trial court subsequently granted the Defendants' motion for costs and contract attorney fees incurred on the SACC, awarding them $355,869. That order is the subject of the companion appeal filed concurrently herewith. (Bettingen et al. v. Rubicon Financial, Inc., et al., [Dec. 27, 2011], G044474 [nonpub. opn.].)
APPEALABILITY
The Bettingens' appeal of the order dismissing the cross-complaint as to Rubicon and GBI is premature because Rubicon's complaint is still pending. As observed in California Dental Assn. v. California Dental Hygienists' Assn. (1990) 222 Cal.App.3d 49 (California Dental), "In civil matters, [appellate court] jurisdiction is limited to the judgments and orders described in Code of Civil Procedure section 904.1. Although an order of dismissal following sustaining of a demurrer without leave to amend (Code Civ. Proc., § 581, subd. (f)(1)) is a judgment (Code Civ. Proc., § 581d) within the general characterization of Code of Civil Procedure section 904.1, subdivision (a), only final judgments are appealable under that subdivision (9 Witkin, Cal. Procedure (3d ed. 1985), Appeal §§ 43-44, pp. 66-68; Eisenberg et al. Cal. Practice Guide: Civil Appeals & Writs (1989) §§ 2.21-2.23, pp. 2-8 [to] 2-9), and there cannot be such a final judgment with respect to parties as to whom a cross-complaint remains pending, even though the complaint has been fully adjudicated. (9 Witkin, supra, § 56, p. 78.)" (California Dental, supra, 222 Cal.App.3d at pp. 59-60.)
Despite the nonappealability of the dismissal as to Rubicon and GBI, there are "further considerations that counsel strongly against simply dismissing this phase of the appeal." (California Dental, supra, 222 Cal.App.3d at p. 60.) For example, in California Dental dismissal of a complaint without leave to amend constituted a final judgment as to the non-cross-complaining defendants and thus plaintiff was entitled, and likely obligated, to appeal the judgment as to them immediately. (Ibid.) Additionally, the dismissal was final as to two plaintiffs who were not named in the cross-complaint. The court concluded exercising mandatory jurisdiction over the appeal as to parties as to whom the judgment was final, but deferring consideration of the appeal as to the parties still involved in the litigation "would further the very fragmentation and multiplicity of appeals that the final judgment rule seeks to avoid." (Ibid.)"Accordingly, although [plaintiff's] appeal is jurisdictionally defective insofar as it relates to [cross-defendants] . . . , rather than dismissing it we will treat it to that extent as a petition for writ of mandate, and will decide that proceeding in conjunction with the rest of the appeal. [Citation.]" (Ibid.)
Similarly in G. E. Hetrick & Associates, Inc. v. Summit Construction & Maintenance Co. (1992) 11 Cal.App.4th 318 (G. E. Hetrick & Associates),a subcontractor sued the property owners, general contractor, and insurer; the general contractor filed a cross-complaint against the subcontractor and property owners, but not the insurer. The trial court granted summary judgment for all defendants on the complaint and the subcontractor appealed. The appellate court held there was a final appealable judgment as to the insurer, but not as to all the other parties because of the pending cross-complaint. (Id. at p. 325.) Nonetheless, the court concluded because "the interests of judicial economy will be better served by resolving the issues as to all parties at this time, and defendants did not originally contest our jurisdiction, we will treat this appeal as a petition for writ of mandate as to all defendants except [the i]nsurer, rather than dismissing the appeal as to all but [the i]nsurer. [Citation.]" (Id. at pp. 325-326, fn. omitted.)
In this case, as in California Dental and G. E. Hetrick & Associates, the dismissal order is appealable as to the individual cross-defendants, none of whom are parties to the complaint, but not appealable as to the corporations Rubicon and GBI, as both are still parties in the pending complaint. However, it is appropriate to treat the appeal as a petition for writ of mandate as to Rubicon and GBI. The entire dispute arises out of Rubicon's acquisition of GBI, and no party has challenged our jurisdiction to consider the matter. To consider the dismissal order as to only the individual defendants, while deferring consideration of the dismissal of Rubicon and GBI (and of Bettingens' right to pursue affirmative relief on the contracts), until they have had their day in court on the complaint would result in the "fragmentation and multiplicity of appeals that the final judgment rule seeks to avoid. It would also, at least theoretically, remit the principal plaintiff and defendant to roles as amicus bystanders while a controversy that is principally theirs resolves itself."(California Dental, supra, 222 Cal.App.3d at p. 60, fn. omitted; see also G. E. Hetrick & Associates, supra, 11 Cal.App.4th at p. 326, fn. 5.)
STANDARD OF REVIEW
The Defendants assert we review the order sustaining the demurrer without leave to amend de novo after '"consider[ing] all of the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports[,]'" and after applying all "reasonable inferences drawn therefrom in the light most favorable to the losing party." That of course is the standard to be applied to review of a grant of summary judgment or summary adjudication, and indeed the cases the Defendants cite are both summary judgment cases, not demurrer cases. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476; Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767-768.)
The correct standard of course is that we review an order sustaining a demurrer by exercising our independent judgment to determine whether a cause of action has been stated under any legal theory. (Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 788.) We must accept as true properly pleaded allegations of fact but not contentions, deductions, or conclusions of fact or law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) "The burden is on [appellant] to demonstrate the manner in which the complaint might be amended, and the appellate court must affirm the judgment if it is correct on any theory. [Citation.]" (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459-460.)
The Defendants urge us to affirm the order sustaining the demurrer without leave to amend because the unwieldy 138-page SACC violates the rules of pleading. They quote the opening paragraph from an ancient California Supreme Court case, Green v. Palmer (1860) 15 Cal. 411, 414, in which the court described the complaint before it as follows: "The complaint, in this case, as a pleading, has no precedent, and, we trust, will never serve as one. It is stuffed full of irrelevant matter—suggestions, charges and statements, which subserve no useful purpose, and are only calculated, when read to the jury, to excite prejudice against the defendants." While we agree the SACC suffers many of the same defects, Green was not a demurrer case. The Supreme Court noted such irrelevant allegations of evidentiary matter and/or legal argument and conclusions are subject to a motion to strike. (Green, supra, 15 Cal. at p. 416; see Krug v. Meeham (1952) 109 Cal.App.2d 274, 277 [averments of legal conclusions ordinarily are deemed to be surplusage and will be disregarded in considering the sufficiency of a pleading].) That the Bettingens included much in their SACC that might properly be stricken does not lead to the inevitable conclusion the SACC failed to contain sufficient allegations to support any of their causes of action. The trial court did not rule on the motion to strike.
On remand, the Defendants may renew their motion to strike inappropriate allegations from the pleading.
"In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties." (Code Civ. Proc., § 452.) "A complaint or cross-complaint shall contain . . . [a] statement of the facts constituting the cause of action, in ordinary and concise language." (Code Civ. Proc., § 425.10, subd. (a)(1).) Only ultimate facts need be alleged, although "'it has long been recognized that "[t]he distinction between conclusions of law and ultimate facts is not at all clear and involves at most a matter of degree[,]" [w]hat is important is that the complaint as a whole contain sufficient facts to apprise the defendant of the basis upon which the plaintiff is seeking relief. [Citations.]' [Citation.]" (Doheny Park Terrace Homeowners Assn, Inc. v. Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1098-1099, italics omitted.)
THE SECOND AMENDED CROSS-COMPLAINT
With that standard in mind, we undertake to parse the Bettingens' monolithic pleading, stripped of its redundant hyperbole and invective, to determine if it stated any viable cause of action. We conclude it does.
We begin with a summary of the general allegations of the SACC. In brief, Bettingen, a licensed securities broker, sold his brokerage business, GBI to Rubicon via a "reverse triangular merger," which involved various contracts calling for payment in the form of cash and Rubicon stock. Additional consideration for the sale was that Bettingen would remain employed by GBI pursuant to a five-year employment agreement. The SACC alleged the Defendants failed to make all the payments due under the agreements, prematurely terminated Bettingen's postmerger employment with GBI, and thereafter interfered with his ability to earn a living as a securities broker.
The tale told in the SACC becomes more sordid when told against the backdrop of Securities and Exchange Commission (SEC) criminal investigations into and indictments against some of the individual defendants for securities fraud. The criminal charges concerned "pump and dump" schemes involving the manipulation of "penny-stocks'" so as to create the illusion of market interest in those stocks, driving up their price and allowing the traders to sell the otherwise virtually valueless stocks for huge profits.
The cross-complainants are identified in the SACC as Bettingen, as an individual, and Bettingen and his wife, Christi, as cotrustees of the Bettingen Trust. Throughout the SACC, Bettingen is alleged to be "elderly," a "senior citizen," and suffering a physical disability due to heart disease. The Bettingens purport to sue "on behalf of themselves," and "derivatively on behalf of . . . Rubicon" because as a result of the merger, the Bettingen Trust became record owner of 1,200,000 shares of Rubicon common stock, which was 9.5 percent of the stock.
The named cross-defendants are Rubicon and GBI; Mangiapane, the founder, chief executive officer, and chairman of the board of directors of Rubicon; Scott, the chief compliance officer and chairman of the board of directors of GBI; McPherson, a "Key Person" of Rubicon and GBI; Herring, a director, accountant, and "Key Person" of Rubicon; Kessler, the chief operating officer, director, and a "Key Person" of GBI; Davis, the president, principal financial officer, chief operating officer, and a director of Rubicon; Brown and Riviello, both "Key Person[s]" of Rubicon; and Vande Hei, a director and "Key Person" of Rubicon.
The SACC alleged Bettingen started GBI in 1980 and had an "outstanding reputation for honesty and integrity." In October 2005, Bettingen became ill and was hospitalized when Mangiapane, with whom Bettingen was casually acquainted, appeared at Bettingen's hospital bedside with an offer to purchase GBI. Mangiapane quickly gained Bettingen's confidence.
By January 2006, Bettingen had returned to work and began attending meetings with Mangiapane "and others," regarding the sale of GBI. Mangiapane "and others," gave Bettingen a Rubicon "Business Plan" and other reports and documents, which the Bettingens now believe "were actually falsified and fraudulent reports and documents, to help entice [Bettingen] to sell . . . GBI." The Bettingens believe the Defendants had manipulated Rubicon's stock price "as high as $7.00 per share" in the fourth quarter of 2006.
By July 2006, a nonbinding letter of intent was signed by Davis, as president of "Rubicon's predecessor company ISSG, Inc., (fka Rub Investments, LTD, fka Titanic Las Vegas, Inc.)" and Bettingen as president of GBI. Eventually, the Defendants presented Bettingen with the formal documents for a "reverse triangular merger" between Rubicon and GBI. The documents included, but were not limited to, an "Agreement and Plan of Merger" (attached as Exhibit B and incorporated into the SACC) (Merger Agreement), a "Share Purchase Agreement" (Exhibit C), and an "Employment Agreement" with Bettingen (Exhibit D).
The Merger Agreement was executed and became effective June 28, 2007. The parties to the Merger Agreement were Rubicon (the acquiring company), a new company called "RFI Sub, Inc. (aka Merger Sub)" and "GBI . . . (aka [the] Target)." The Merger Agreement was signed by Bettingen as president of GBI, Davis, as president of Rubicon, and Mangiapane, as president of RFI Sub, Inc. Under the terms of the Merger Agreement, the RFI Sub., Inc. would merge into GBI and cease to exist. GBI would be the surviving entity and a wholly owned subsidiary of Rubicon and Bettingen's stock in GBI would be cancelled. The Merger Agreement explained, "Grant Bettingen Trustee of the Bettingen 1999 Trust" was the sole shareholder of GBI (i.e., the "Target Shareholder")—holding 90 shares of GBI. The "Merger Consideration" included, among other things, that those 90 shares of GBI would be exchanged for 1,200,000 shares of Rubicon common stock, which would vest immediately in the Target Shareholder. Additionally, the Target Shareholder (i.e., Grant Bettingen Trustee of the Bettingen 1999 Trust) would be paid $974,000 in cash in two installments: half ($487,000) upon closing of the transaction and the other half on the one-year anniversary of closing.
The Merger Agreement was amended three times before the deal closed. On or about September 7, 2007, it was amended to allow Rubicon to purchase 15 percent of outstanding GBI stock for $360,000 prior to the closing of the merger transaction. The amendment stated the Merger Consideration (i.e., payments to the Bettingen Trust) "shall not in any way [be] adjusted by the purchase of [GBI] Shares by [Rubicon] prior to Closing of the Merger." Also on September 7, 2007, Rubicon and GBI entered into a Share Purchase Agreement (Exhibit C attached to SACC) allowing Rubicon to purchase from GBI 15 percent of GBI's outstanding shares for $360,000. That agreement was signed by Bettingen as president of GBI. The SACC alleged Rubicon breached the Share Purchase Agreement by failing to make the scheduled payments.
On or about January 23, 2008, the Merger Agreement was amended again to provide, "'[Rubicon] agrees to deposit $200,000 into a non-operating [GBI] bank account, which shall be retained by [GBI] and only used by [GBI] to maintain its net capital at $200,000 as required by [Financial Industry Regulatory Authority (FINRA)]. If the CMA is not approved by FINRA, [GBI] shall immediately return the $200,000 to [Rubicon].'" On or about March 20, 2008, the Merger Agreement was amended a third time to provide: "'The $200,000 deposited with [GBI] shall be applied to the purchase price of the additional [nine] target shares in accordance with the Amended Stock Purchase Agreement. The [GBI] securities purchased by [Rubicon] prior to Closing of the Merger pursuant to the Stock Purchase Agreement and the Amended Stock Purchase Agreement shall not be considered outstanding [GBI] Shares for purposes of receiving the Merger Consideration, as defined in the Merger Agreement. . . .'" The third amendment also stated, "'The Merger Consideration shall not be in any way adjusted by the purchase of [GBI] Shares by [Rubicon] prior to Closing of the Merger.'"
The merger transaction eventually closed on June 2, 2008, when FINRA gave its approval. On that same date, GBI, now a wholly owned subsidiary of Rubicon, and Bettingen executed the Employment Agreement (Exhibit D to the SACC), that had been negotiated as part of the sale price of GBI to Rubicon and had been attached as an exhibit to the Merger Agreement. The Employment Agreement was signed by Scott as chief operating officer of GBI and Bettingen, as an individual. The Employment Agreement provided for Bettingen to be employed by GBI for a five-year term (ending June 1, 2013), with a two-year renewal. He could only be terminated for cause. The Employment Agreement provided for a salary, stock options and other benefits, incentives and other compensation, and health insurance for Bettingen and his dependents.
The SACC alleged that around the time the Merger Agreement was executed (June 2007), Mangiapane and McPherson began placing personnel in Rubicon from a recently failed securities brokerage (Brookstreet Securities Corporation), to start "run[ning] the show" at GBI all as part of a "vision" to ultimately get Bettingen out of the way. These new staff members began "to purge GBI . . . of all non-Brookstreet people . . . ." Additionally, during this time frame the individual Defendants who were also directors of Rubicon were trying to "effectuate a 'pump' of . . . Rubicon" by manipulating stock value and structuring a suspicious "'Spin Out'" of a wholly owned Rubicon subsidiary. They also entered into a suspicious agreement allowing Rubicon to return AIS stock it had previously bought, getting an unsecured promissory note from Riviello for $100,000, that was "backdated and falsified" so as to "cloud and falsify who the real owner of the AIS stock was . . . ."
The SACC alleged that shortly after the close of the merger transaction, "and with full knowledge that . . . Bettingen was elderly and had already suffered an aortic aneurysm," the Defendants "began a systematic and calculated attack on the [Bettingens] to drive them from . . . GBI . . . . The attacks included . . . personal and professional insults creating a hostile work environment, including disparaging remarks and e-mails regarding . . . Bettingen's mental and physical health; harassment; defamatory remarks to the financial community and others regarding Bettingen's health and competency to continue in his role at GBI . . . ; other financial pressures . . . include[d] pay cuts, denial of expense reimbursements, denial of commissions and overrides and other compensation; denial of [the Bettingens'] access to books and records of GBI . . . ; denial of [the Bettingens'] access to important company financial information; as well as fraudulent employment 'Correction Notices' directed to . . . Bettingen, which violated labor standards and involved false and inflammatory allegations."
In August 2008, Rubicon and GBI "management" informed Bettingen that due to cash flow problems, all staff and executives, including Mangiapane and Scott "had to take an immediate fifty percent (50%) pay cut." Bettingen accepted the pay cut, but later discovered no one else had taken a pay cut. When he demanded access to financial records to confirm the pay cut, access was denied. During this same time period, Mangiapane, Scott, Herring, and Vande Hei "unilaterally and arbitrarily changed . . . Bettingen's compensation to be 'performance based' in violation of the Employment Agreement . . . ."
In February 2009, Mangiapane told Ralph Tenebruso and Jay Gurly, registered securities brokers in New York, that Bettingen was running a "'Ponzi scheme.'" Mangiapane "knew the statement was false when made, and made it with the intention of damaging . . . Bettingen both personally and professionally."
On or about March 13, 2009, the Defendants "through their respective Boards of Directors," terminated Bettingen's employment with GBI. They cancelled the Bettingens' health insurance, and "illegally and wrongfully" suspended Bettingen's "Series 7 General Securities license" depriving him of income and access to his clients and ongoing transactions. The Defendants "fraudulently and with malice, created false barriers for . . . Bettingen to reinstate his . . . license." They then forced Bettingen to remove all of his files and belongings from the offices.
The SACC alleged that after firing Bettingen, GBI and Rubicon refused to pay him his earned commissions, expense reimbursements, deferred salary, and investment banking overrides, thereby "converting" Bettingen's money to their own purposes.
In May 2009, the federal government filed the indictment against Mangiapane, Brown, and Riviello, but Rubicon and its Board of Directors took no action and did not perform any investigation or inquiry concerning the indicted defendants' activities at Rubicon or GBI. In 2010, Brown and another individual (not named in the Bettingens' complaint) plead guilty to charges in separate criminal indictments "regarding the same matter."
The Defendants request us to take judicial notice of a March 22, 2011, federal court order dismissing the indictment against Mangiapane without prejudice upon request of the United Stated Attorney. The order has no bearing on the sufficiency of the Bettingens' pleading and the request is DENIED.
On or about June 2, 2009, the first anniversary of the close of the Rubicon/GBI merger, Mangiapane, Herring, Vande Hei, and Rubicon's legal counsel "advised that not only was Rubicon not going to make its contractual payment to [the Bettingens] but that [the Bettingen's] were to immediately cancel all vested Rubicon stock 'or else' Rubicon was going to sue [them] for . . . [$400,000]." On or about June 5, 2009, "Mangiapane and others . . . again manipulated Rubicon's stock trading volume and price in an orchestrated effort to falsify market interest in Rubicon's stock . . ." and "Rubicon took no action to investigate or remedy the sudden, inexplicable jump in Rubicon's trading volume and price." Soon thereafter, the Bettingens "learn[ed] that FINRA began to charge a number of former Brookstreet securities brokers with Fraud in connection with the Retail Sales of Collateralized Mortgage Obligations . . . ."
Based on the foregoing allegations, the SACC pleaded 30 causes of action including: breach of contract and declaratory relief (1st-3d, 23d causes of action); breach of implied covenant of good faith and fair dealing (4th-5th causes of action); fraud (6th-7th causes of action); intentional interference with contract/prospective economic advantage (8th-9th causes of action); negligent interference with contract/prospective economic advantage (10th-11th causes of action); violation of the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. § 1961 et seq., (RICO)) (13th cause of action); minority shareholder oppression (14th cause of action); conversion (15th cause of action); defamation and commercial disparagement (16th-17th causes of action); intentional and negligent infliction of emotional distress (18th-19th, 31st causes of action); breach of fiduciary duty (20th cause of action); unfair competition (21st cause of action); negligence (22d cause of action); violation of the California Fair Employment and Housing Act (FEHA) (24th-28th causes of action); wrongful termination in violation of public policy (29th cause of action); and negligent supervision of employees (30th cause of action).
WAIVED & ABANDONED CAUSES OF ACTION AND ARGUMENTS
Before we consider whether any of the SACC's 30 causes of action were sufficiently plead, we narrow the daunting task by culling those causes of action that have either not been addressed at all by the Bettingens in their opening brief, or that have been so inadequately addressed that appellate review has been waived.
The appellate rules are clear: Even when we employ a de novo review, "it is limited to issues which have been adequately raised and supported in [appellant's opening] brief. [Citation.]" (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6; see McGettigan v. Bay Area Rapid Transit Dist. (1997) 57 Cal.App.4th 1011, 1016, fn. 4 ["We deem these claims abandoned for lack of argument that the trial court erred in dismissing them"].) "It is a fundamental rule of appellate review that the judgment appealed from is presumed correct and '"'all intendments and presumptions are indulged in favor of its correctness.'" [Citation.]' [Citation.] An appellant must provide an argument and legal authority to support his contentions. This burden requires more than a mere assertion that the judgment is wrong. 'Issues do not have a life of their own: If they are not raised or supported by argument or citation to authority, [they are] . . . waived.' [Citation.] It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness. When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived. [Citation.]" (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 (Benach), fn. omitted.) To consider arguments not adequately raised in the opening brief would require this court to act as appellants' counsel on appeal. This is not our role.
The Bettingens' opening brief contains no argument at all concerning the SACC's RICO cause of action (13th cause of action), the "minority shareholder oppression" cause of action (14th cause of action), or the commercial disparagement cause of action (17th cause of action). Accordingly, we deem them to be abandoned and we will not address them further. (Bagley v. International Harvester Co. (1949) 91 Cal.App.2d 922, 924 [where demurrer is sustained without leave to amend, appellant's failure to advance arguments in connection with one of several causes of action purportedly stated in complaint deemed an abandonment of such cause of action]; see also In re Sade C. (1996) 13 Cal.4th 952, 994 [issues not raised in an appellant's brief are deemed waived or abandoned].) The Bettingens' opening brief purports to address every other cause of action in the SACC, asserting everyone was adequately plead. But most are so inadequately and haphazardly briefed, that we deem many of them waived as well.
For example, the SACC contained four causes of action for intentional and negligent interference with prospective economic advantage: two purportedly on the Bettingens' individual behalves (8th and 10th causes of action) and two purported "derivative" causes of action brought as shareholders of Rubicon (9th and 11th causes of action). They also alleged a "derivative" breach of fiduciary duty cause of action, brought as shareholders of Rubicon (20th cause of action). The Bettingens' opening brief contains separate sections on the two "individual" causes of action. The "derivative" causes of action are lumped into a section in which the only argument is that they adequately alleged their status as shareholders to seek redress for harms to the corporations, and apparently we are meant to refer back to the arguments on the individual for the substantive argument.
As for each of the foregoing causes of action, the Bettingens' briefing is the same. They provide us with one paragraph reciting the elements of cause of action followed by a second two-sentence paragraph stating simply "each and every factual element was plead in [their] SACC[,]" and therefore, the trial court erred by sustaining the demurrer as to these causes of action. They engage in absolutely no analysis of the alleged facts or attempt to demonstrate how the alleged facts support the particular cause of action. Accordingly, their arguments concerning these causes of action are waived. (Lewis v. County of Sacramento (2001) 93 Cal.App.4th 107, 116 [appellant's responsibility to affirmatively demonstrate error in sustaining demurrer].)
The same is true for several other causes of action. The SACC contained three emotional distress causes of action (18th, 19th & 31st causes of action), a negligence cause of action (22d cause of action), a cause of action for harassment in violation of the FEHA (24th cause of action), and negligent hiring or retention of employees (30th cause of action). The Bettingens' opening brief contains a separate section on each, and again their argument is comprised of nothing more than a cite to a case setting forth the elements followed by the statement the SACC adequately alleged the elements, with absolutely no analysis. We conclude these arguments are waived.
The Bettingens' arguments concerning the SACC's FEHA causes of action for failure to prevent harassment cause of action (27th cause of action), and failure to take corrective action cause of action (28th cause of action) (Gov. Code, § 12940, subds. (j) & (k)), and the SACC's common law wrongful termination in violation of public policy (29th cause of action) fare no better. For each the Bettingens' substantive argument is comprised of nothing more than a quote of the form CACI jury instruction for the cause of action interlineated with a few cites to the clerk's transcript, or an extended single spaced verbatim quote of paragraphs from the SACC followed by the statement the quoted section is an adequate allegation of a cause of action for which there has been absolutely no legal analysis. In view of the total absence of legal analysis and citation to appropriate authorities to support their assertions (see People v. Morales (2001) 25 Cal.4th 34, 48, fn. 7 [jury instructions not authority to establish legal propositions or precedent and should not be cited as authority for legal principles]), we decline to consider these claims either. (See Susag v. City of Lake Forest (2002) 94 Cal.App.4th 1401, 1416.) We turn to the causes of action for which arguably adequate analysis has been provided.
CONTRACT CAUSES OF ACTION
The Bettingens' SACC contained three breach of contract causes of action: (1) breach of the Merger Agreement (1st cause of action) against Rubicon and GBI; (2) breach of the Share Purchase Agreement (2d cause of action) against Rubicon; and (3) breach of the Employment Agreement (3d cause of action) against GBI. It also alleged causes of action for breach of the implied covenant of good faith and fair dealing contained in the Merger Agreement (4th cause of action) and the Employment Agreement (5th cause of action). The SACC also contained a declaratory relief cause of action against Rubicon and GBI (23d cause of action). We conclude each sufficiently alleged the necessary elements for a cause of action, and we reverse the order as to those causes of action.
The elements of a cause of action for breach of contract and for breach of the implied covenant of good faith and fair dealing are similar. "The essential elements of a breach of contract claim are: '(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.' [Citation.]" (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.) But while the third element of a breach of contract cause of action is the defendant's actual breach, a breach of the implied covenant of good faith and fair dealing cause of action requires proof the defendant unfairly interfered with plaintiff's right to receive the benefits of the contract. The implied covenant is supplemental to the express contractual covenants. (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032(Racine).)It imposes upon each contracting party the duty to do everything the contract presupposes he or she will do to accomplish its purpose but cannot be used to create obligations not contemplated by the contract. (Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1093.)
"A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the [c]ourt. (Code Civ. Proc., § 1060; Maguire v. Hibernia [S. & L.] Soc. (1944) 23 Cal.2d 719 . . . .)" (Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 947.)
The SACC's 1st cause of action alleged the Merger Agreement was entered into between Rubicon, RFI Sub, Inc., and GBI. The terms were that RFI Sub, Inc., would merge into GBI and cease to exist; "Cross-complainant's" GBI stock would be cancelled; "Cross-Complainants" would receive 1,200,000 shares of Rubicon stock and $974,000 cash to be paid in two installments. "Cross-complainants" had fully performed the Merger Agreement, but Rubicon and GBI had breached the agreement by failing to pay the final installment to the Bettingens causing them damage. The SACC's 4th of action additionally alleged Rubicon's actions unfairly interfered with the Bettingens receiving the benefit of the Merger Agreement.
The SACC's 2nd cause of action alleged the Share Purchase Agreement was entered into between Rubicon and GBI, providing for Rubicon to purchase 15 percent of GBI's shares for $360,000; Bettingen and Christi "individually and as co-trustees" of the Bettingen Trust were the beneficiaries under the Share Purchase Agreement and had performed all conditions required of them; Rubicon breached the Share Purchase Agreement by failing to make scheduled payments causing the Bettingens' damage.
The SACC's 3rd cause of action alleged the Employment Agreement was entered into between GBI and Bettingen as part of the consideration for the Merger Agreement; the employment term was five years with a two-year renewal; Bettingen was to receive a negotiated salary, compensation in the form of stock options among other things, and health insurance. Bettingen performed all conditions required of him. GBI breached the Employment Agreement by first duping him into taking a 50 percent pay cut, and then ultimately terminating his employment in violation of the terms of the Employment Agreement causing Bettingen damage. The SACC's 5th cause of action further alleged GBI's actions unfairly interfered with Bettingen receiving the benefit of the Employment Agreement.
The SACC's 23d cause of action alleged an actual controversy existed between the Bettingens, Rubicon, and GBI concerning their respective rights and duties under the three agreements. It sought a judicial declaration of the parties' rights and duties.
The Defendants' demurrer to the 1st, 3d, 4th, and 5th causes of action in the FAC and the SACC (relating to the Merger Agreement and the Employment Agreement) raised only the specific ground Christi was not a party to those agreements, i.e., there was a misjoinder of a party (see Code Civ. Proc., § 430.10, subd. (d)). The Defendants' demurrer to the 2d cause of action in the FAC and the SACC (relating to the Share Purchase Agreement) raised only the specific ground that "none of the Cross-complaintants" were a party to the Share Purchase Agreement. The demurrer made no reference to the 23d cause of action for declaratory relief.
Preliminarily we note the Defendants' complaint that Christi (and/or the family trust) were "misjoined" in the breach of contract causes of action was not a sufficient reason for sustaining the Defendants' demurrer as there was no prejudice to Rubicon or GBI, the properly named defendants in those causes of action. "'Although the code seems to authorize the sustaining of a demurrer solely on such a technical objection [of misjoinder], the authorities indicate that the defendant is entitled to a favorable ruling only when he can show some prejudice suffered or some interests affected by the misjoinder. In practical effect, this means that such a demurrer can be successfully used only by the persons improperly joined. A proper defendant is seldom injured by the joinder of unnecessary or improper parties plaintiff or defendant, and his demurrer ought to be overruled.' (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 926, pp. 385-386, italics omitted.)" (Royal Surplus Lines Ins. Co. v. Ranger Ins. Co. (2002) 100 Cal.App.4th 193, 198 (Royal Surplus Lines).)
Furthermore, in sustaining the demurrer to the FAC, the trial court's order directed "the Bettingens" to allege their standing to sue for breach of contract or interference with contract because they were not parties to them. But adequate allegation of standing is apparent from the pleading. (Royal Surplus Lines, supra, 100 Cal.App.4th at p. 198 ["Demurrers on the ground of misjoinder lie only when the defect appears on the face of the complaint or matters judicially noticed"].)
First and foremost, Bettingen as an individual was a party to the Employment Agreement. He clearly had standing to sue for its breach, and nowhere do the Defendants suggest otherwise. That Bettingen's wife and family trust might have been improperly named in that cause of action because the pleading referred to damages sustained by the "cross-complainants" rather than Bettingen alone does not justify denying relief.
Furthermore, it is sufficiently clear from the SACC the Bettingen Trust was alleged to be the intended beneficiary of both the Merger Agreement and the Share Purchase Agreement, with the consideration for the merger and share purchase being paid to the trust. (Civ. Code, § 1559 [intended third party beneficiary has standing to enforce contract].) Bettingen and Christi were the cotrustees of the Bettingen trust, and thus could sue in their representative capacities. "'"Courts under the reformed system of procedure look to the substance of things rather than to form, and to persons and things rather than to mere names. This manner of treating things constitutes the life and spirit of the reformed system of procedure [citation]. That system was designed to enable courts of justice to brush aside technicalities affecting no substantial right, and decide cases upon the merits."' [Citation.]" (Plumlee v. Poag (1984) 150 Cal.App.3d 541, 546.) Although the SACC ineptly alleged the Bettingens' standing to sue for breach of the Merger Agreement and the Share Purchase Agreement as cotrustees of their trust, the factual basis for standing is apparent. Indeed, we note that in its complaint Rubicon is suing Bettingen as an individual and in his capacity as trustee of the Bettingen Trust for breach for the very same Merger Agreement.
Besides the failure to adequately allege Christi's standing, the only argument the Defendants can muster on appeal to support sustaining the demurrer to each of these causes of action without leave to amend is that the three contracts were not physically attached to the SACC. Accordingly, the Defendants assert that creates an "uncertainty as to the actual terms of the contracts" and the absence of the contracts prevents the Bettingens from stating causes of action upon them. The Defendants cite to no authority for their contention. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 (Badie); Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 (Kim) [appellate court not required to consider points not supported by citation to authorities or record].) Furthermore, the contracts were attached to the FAC, and the original complaint, and the Merger Agreement is attached as an exhibit to Rubicon's complaint. The Defendants' demurrer to the SACC makes specific reference to the contracts having been attached as exhibits to the SACC, suggesting the served SACC included the exhibits. It is apparent the failure to physically attach them to the filed copy of the SACC was an oversight that has not prejudiced the Defendants in anyway. In short, the SACC adequately alleged its causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing (1st-5th causes of action), and for declaratory relief (23d cause of action), and the trial court erred in sustaining the demurrer to those causes of action.
FRAUD CAUSES OF ACTION
The Bettingens' SACC 6th cause of action was for fraud against the individual defendants Mangiapane, Brown, Riviello, McPherson, Herring, Davis, Scott, Kessler, and Vande Hei based on intentional misrepresentations. The SACC's 7th cause of action was titled "fraud and deceit: stock manipulation (derivative)." The Bettingens contend both causes of action were adequately pleaded. We disagree.
The elements of a cause of action for fraud 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.' [Citations.]" (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Notwithstanding the policy of liberal construction of the pleadings, fraud must be pled with particularity (id. at p. 645; Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184); general and conclusory allegations do not suffice. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.) Thus, "'[e]very element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.' [Citation.]" (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) "This particularity requirement necessitates pleading facts which 'show how, when, where, to whom, and by what means the representations were tendered.'" (Ibid.)A plaintiff must be specific and identify the persons who allegedly made the false representations. (See generally 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, §§ 711-712, pp. 126-128.)
The Bettingens' SACC 6th cause of action alleges that all the individual defendants misrepresented unspecified "material terms" in Rubicon's "Business Plans and other corporate documents," which "falsely stated" "Daniel Landau's, Patrick Kelly's, Brown's and Rivello's role" in Rubicon; "falsely stated Patrick Kelly's resume; falsely stated dates of acquisition of other entities . . . ; falsely stated the status and stature of the entities to be acquired by Rubicon . . . ; falsely stated Rubicon's financial information and projections . . . ; falsely represented to [the Bettingens] that Rubicon was a viable enterprise when in fact it was a sophisticated front for an ongoing fraud and criminal enterprise . . . ; [and] falsely represented to [the Bettingens] that they were acting in the best interests of Rubicon and GBI . . . ." The 6th cause of action contains a litany of other allegations of misconduct by all the individual defendants, but none pertain to allegedly false representations. The Bettingens then alleged all the individual defendants intended for the Bettingens to rely on the misrepresentations, they justifiably relied on the same false representations, and they were damaged.
The 6th cause of action for fraud is deficient. This cause of action asserts fraud against the individual defendants as a group. There is no specificity as to any specific representations made by any particular defendant. The SACC nowhere describes how, when, where, by whom, or by what means the representations were tendered. There is no suggestion as to what the misrepresentations were in Rubicon's "Business Plans and other corporate documents." There is no offer as to how the representations were false. Two of the persons referred to in the fraud cause of action, Daniel Landau and Patrick Kelly, are not named defendants and they are mentioned here for the first time. There is absolutely no suggestion as to who they are or why on earth a misrepresentation as to their "roles" in Rubicon or their "resumes" would cause any harm to the Bettingens.
In sustaining the demurrer to the FAC with leave to amend, the trial court specifically directed the fraud cause of action needed to be plead with specificity. The Bettingens responded by simply inserting parenthetical directions in the SACC to "see" specific paragraphs earlier in the pleading. We have seen those paragraphs, and they do not help. The only one of conceivable relevance to which the Bettingens refer in their opening brief is paragraph 41, in which the Bettingens alleged they believe that in 2006 defendants "manipulated" Rubicon's stock price "as high as $7.00 per share" in the fourth quarter of 2006, but there is no specificity as to if, how, or when that allegedly inflated stock price was communicated to the Bettingens, what the true price was, or any allegation they relied on that particular representation.
The Bettingens liken this case to Murphy v. BDO Seidman (2003) 113 Cal.App.4th 687, in which the court held a securities fraud cause of action had been adequately alleged. But the pleading there was far more specific. The investor plaintiffs alleged fraud based on two accounting firms' false reports of a company's assets upon which the plaintiffs relied in investing in the company and approving a merger. (Id. at pp. 689-690.) The plaintiffs pleaded that contributing to the company's inflated value were the representations that one report valued its assets at $121,274,018, when in fact they were worth only $6,951,667; its broadcast license was worth $79,048,589, when in fact it was worth less than $1 million if generally accepted accounting principles were applied; and the report falsely represented the company had $6,643,427 in annuities when no such annuities existed. (Id. at pp. 692-693.)
The Bettingens also rely on Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216-217, for the proposition that less specificity is required where the defendant would likely have greater knowledge of the facts than the plaintiff. But that case does not obviate the need for specificity all together.
Here, despite their pleading's substantial girth, there are no specifics in the Bettingens's SACC as to which individual made which representation and no way any of the individual defendants would know what specific falsehoods they had to defend against. The trial court properly sustained the demurrer to the 6th cause of action without leave to amend. Furthermore, in their briefs the Bettingens suggest no way in which they would amend the SACC to cure its deficiencies. (See Total Call Internat., Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 166 [appellant's burden to show facts he or she could plead to cure defects].)
The SACC's 7th cause of action was also for fraud, titled "fraud and deceit: stock manipulation (derivative)" against all the individual defendants. In it, the Bettingens allege a number of allegedly fraudulent acts by the individual defendants they alleged caused harm to Rubicon. On appeal, their only attempt at salvaging this cause of action is to argue they adequately pleaded their status as Rubicon shareholders to establish standing. They make no attempt at explaining how they adequately alleged the cause of action. Accordingly, we decline to consider it further.
CONVERSION
The SACC's 15th cause of action was for conversion against all the Defendants. The trial court concluded the SACC failed to state facts sufficient to constitute a cause of action. We agree.
The SACC's conversion cause of action alleged only that Bettingen was "entitled to the possession" of property and "including, but not limited to: PFG monies; Vertical Capital monies; and Mammoth Resources monies." It alleged all the Defendants had "cashed PFG check(s) made out to . . . Bettingen personally . . . ." Bettingen demanded the Defendants "return" these monies to him, but they refused.
"'A cause of action for conversion requires allegations of plaintiff's ownership or right to possession of property; defendant's wrongful act toward or disposition of the property, interfering with plaintiff's possession; and damage to plaintiff. [Citation.] Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment. [Citation.]' [Citations.] A 'generalized claim for money [is] not actionable as conversion.' [Citations.]" (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.) The SACC's conversion allegations appear to be nothing more than generalized claims for money Bettingen believes he is still owed either due to the sale of GBI to Rubicon, or as a result of his postmerger employment by GBI. Additionally, while a check may be the subject of a conversion (Acme Paper Co. v. Goffstein (1954) 125 Cal.App.2d 175, 179), "[a]n action for conversion of [a check] may not be brought by . . . a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a copayee[,]" (Cal. U. Com. Code, § 3420, subd. (a)), and there are no allegations the subject check was delivered to Bettingen.
DEFAMATION
The SACC's 16th cause of action was for defamation against Mangiapane and Scott. The SACC alleged that in February 2009, "Mangiapane . . . told Ralph Tenebruso and Jay Gurly, who are registered securities [b]rokers in New York, that [Bettingen] was running a 'Ponzi scheme.'" And in November 2008, "Scott made false and defamatory comments regarding [Bettingen's] health and mental competency to Rubicon and GBI . . . staff . . . ." The SACC alleged Bettingen was damaged personally and professionally by the false statements.
The Defendants' demurrer to the defamation cause of action in the FAC was on the grounds the cause of action sought relief on behalf of Christi, but no actionable conduct as to her had been alleged (i.e., misjoinder). The trial court's order sustaining the demurrer to the FAC with leave to amend made no mention of the defamation cause of action. The Defendants' demurrer to the SACC was again for the same reason—misjoinder of Christi in the defamation cause of action—plus the "catch-all" that the entire SACC was uncertain, ambiguous, and/or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).) The trial court sustained the demurrer for the general reason the entire SACC failed to state facts sufficient to constitute any cause of action.
The SACC adequately alleged a defamation cause of action against Mangiapane. The essential elements of a cause of action for defamation are simply that the specified false and defamatory matter was published to third persons. (5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 735, p. 156.) A statement is defamatory if it, among other things, "[t]ends directly to injure [the plaintiff] in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits." (Civ. Code, § 46, subd. (3).) Such defamatory statements generally "reflect on the integrity and competence of the plaintiff, the clearest being allegations of unethical activity or incompetence. (See 5 Witkin, [Summary of Cal. Law (10th ed. 2005)] Torts, § 553, pp. 808-809.)" (Regalia v. The Nethercutt Collection (2009) 172 Cal.App.4th 361, 369.) Whether a statement is defamatory "can be reached on a demurrer as a matter of law[,]" but if "the language is capable of two meanings, one harmless and one defamatory, it is the province of the trier of fact to determine in which sense the language was used and understood. [Citation.]" (Polygram Records, Inc. v. Superior Court (1985) 170 Cal.App.3d 543, 551, fn. omitted.)
Mangiapane's statement at issue here—telling licensed securities brokers that Bettingen, a licensed securities broker, was running a "Ponzi scheme" is readily susceptible to a defamatory meaning. Such a statement easily could impute unethical and possibly criminal conduct to Bettingen and thus the defamation claim against Mangiapane survives demurrer.
The same cannot be said as to Scott. She was accused of having made unspecified "false" statements to her own staff about Bettingen's "health and mental competency." The allegation is so general and vague there is simply no way to discern what specific false statements Scott is supposed to defend against. Bettingen offers nothing more specific. Accordingly, no cause of action has been stated against Scott.
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The Defendants offer no suggestions as to what else was required to be pled by the Bettingens. Their demurrer was on the specific grounds Christi was improperly joined in the conversion cause of action, and the only comment their respondents' brief makes about the defamation cause of action is in accord. They argue only that the defamation cause of action alleges "only conduct toward [Bettingen]" and alleged false statements about him alone, yet "seek[s] relief for all . . . ." As we have already discussed above, any misjoinder of Christi as a party seeking relief has no practical effect. (Royal Surplus Lines, supra, 100 Cal.App.4th at p. 198 ["[S]uch a demurrer can be successfully used only by the persons improperly joined. A proper defendant is seldom injured by the joinder of unnecessary or improper parties plaintiff or defendant, and his demurrer ought to be overruled.' [Citation.]") Accordingly, the trial court erred is sustaining the demurrer as to the SACC's 16th cause of action for defamation as to defendant Magiapagne.
UNFAIR COMPETITION
The SACC's 21st cause of action against all the individual defendants was for violation of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.). We agree with the trial court that no viable cause of action was stated.
As defined by statute, unfair competition includes "any unlawful, unfair or fraudulent business act or practice . . . ." (Bus. & Prof. Code, § 17200.) An unlawful business practice is anything that can be called a business practice and that at the same time is forbidden by federal, state, or local law. (Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 539.) A business practice is considered fraudulent if it is likely to deceive the public. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471.) An act or practice is unfair "if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits. [Citations.]" (Id. at p. 1473, italics added.)
The Bettingens argue the following acts of various individual Defendants alleged throughout the SACC's breach of contract, fraud, and tort causes of action arising from the sale of GBI to Rubicon and Bettingens' subsequent termination also constitute unlawful, unfair, or fraudulent business acts by them: preparing false and misleading business plans and corporate documents for Rubicon; falsely representing Rubicon was a viable enterprise; defaming Bettingen; manipulating Rubicon stock value in 2006 and trading volume in 2009; allowing Rubicon to enter into a suspicious agreements; and commissioning false and misleading reports about Rubicon and "other companies."
The Bettingens have not demonstrated these acts fall within the purview of the UCL. "The UCL's purpose is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. [Citation.]" (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.) "[T]he UCL is not an all-purpose substitute for a tort or contract action." (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150, italics added (Korea Supply)?)Its remedies are generally limited to restitution and injunctive relief. (Bus. & Prof. Code, § 17203.) "While any member of the public can bring suit under the act to enjoin a business from engaging in unfair competition, it is well established that individuals may not recover damages. [Citation.]" (Korea Supply, supra, 29 Cal.4th at pp. 1144, 1150.)
It is apparent the Bettingens have added the UCL cause of action in the misguided belief that if proven it would entitle them civil penalties—it would not. Their SACC repeatedly alleges Bettingen is a "senior citizen" and a "disabled person" as defined by Business and Professions Code section 17206.1, subdivision (b)(1) and (2), making the Defendants liable for a $2,500 penalty for each violation of the UCL. Such penalties are only available in UCL actions brought by the Attorney General or local public prosecutor. (See Bus. & Prof. Code, §§ 17206, subd. (a); 17206.1, subd. (a)(1).) The Bettingens have not alleged any conduct for which the UCL entitled them to relief.
REMAINING FEHA CAUSES OF ACTION
Discrimination & Retaliation
The SACC's 25th cause of action was for discrimination based on age, disability, and medical condition in violation of the FEHA against Rubicon and GBI. (Gov. Code, § 12940, subd. (a).) The 26th cause of action was for retaliation in violation of the FEHA against Rubicon and GBI. (Gov. Code, § 12940, subd. (h).) The trial court's order sustaining the demurrer to the FAC stated the discrimination cause of action "must be pleaded with greater specificity" and the retaliation cause of action "must identify which defendants engaged in alleged wrongdoing." The Defendants' demurrer to the SACC challenged these two causes of action on the grounds the complaint did not allege facts sufficient to state a cause of action, the grounds upon which the trial court sustained the demurrer without leave to amend.
The Bettingens contend they adequately alleged both causes of action. In stating a cause of action for violation of the FEHA, "the plaintiff is required only to set forth the essential facts of his case '"with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action."' [Citations.]" (Alch v. Superior Court (2004) 122 Cal.App.4th 338, 382 (Alch).)
"[T]he elements of a claim for employment discrimination in violation of [Government Code] section 12940, subdivision (a), are (1) the employee's membership in a classification protected by the statute; (2) discriminatory animus on the part of the employer toward members of that classification; (3) an action by the employer adverse to the employee's interests; (4) a causal link between the discriminatory animus and the adverse action; (5) damage to the employee; and (6) a causal link between the adverse action and the damage." (Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686, 713 (Mamou).)
"The elements of a claim for retaliation in violation of [Government Code] section 12940, subdivision (h), are substantially the same: (1) the employee's engagement in a protected activity, i.e., 'oppos[ing] any practices forbidden under this part'; (2) retaliatory animus on the part of the employer; (3) an adverse action by the employer; (4) a causal link between the retaliatory animus and the adverse action; (5) damages; and (6) causation." (Mamou, supra, 165 Cal.App.4th at p. 713.)
The SACC's 25th cause of action for discrimination alleged Bettingen was elderly and suffered from heart disease, making him a member of a protected class. Rubicon and GBI, because of their interrelation, common management, centralized control of labor relations, and common ownership or financial control should be considered a single employer. Rubicon and GBI, through their officers, directors, supervisors and managing agents, discriminated against Bettingen by a variety of adverse employment actions including: setting unreasonable barriers to Bettingen reinstating his securities license; making false statements about his work ethic and mental competency to coworkers and to Tenebruso and Gurly; forcing him to take a 50 percent pay cut no other employee was subjected to; refusing to pay him his earned salary and commissions or to reimburse expenses; and "wrongful[ly] discharge[ing]" him from employment. Bettingen alleged his age, disability, and medical condition were motivating reasons for his adverse treatment, and he was damaged. The SACC's 26th cause of action for retaliation added allegations that Bettingen engaged in protected activity of complaining to the individual defendants (Mangiapane, Brown, Riviello, McPherson, Herring, Davis, Scott, Kessler, and Vande Hei) about the unlawful discrimination. That protected activity was a motivating reason for Rubicon and GBI retaliating by engaging in conduct that adversely affected Bettingen's employment.
The Defendants offer no reasoned legal analysis as to what was lacking in the SACC. They suggest the pleading was inadequate because there are no facts alleged as to why the Defendants would have wanted to discriminate against him, but they offer no authority for the proposition a reason for discriminating must be given. They also seemly object to the lack of specificity as to what acts were committed by any particular individual defendant against whom the SACC seeks relief leaving them unable to discern what they did wrong. But these causes of action are not against the individual defendants—they seek relief only against the employer.
"[A] plaintiff is required only to set forth the essential facts of his or her case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action. (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608 . . . ; see also Fenn v. Sherriff (2003) 109 Cal.App.4th 1466, 1492 . . . .) Nothing more is required. (Alch[, supra,] 122 Cal.App.4th . . . [at p.] 390 . . . .) Indeed, there is no need to require specificity in the pleadings because modern discovery procedures necessarily affect the amount of detail that should be required in a pleading. (Doheny Park Terrace Homeowners Ass'n, Inc. v. Truck Ins. Exchange[, supra,]132 Cal.App.4th [at p.] 1099 . . . .)" (Thomas, Cal. Civil Courtroom Handbook & Desktop Reference (2011 ed.) § 11:13.) The SACC contains sufficient allegations to state its 25th cause of action for discrimination (Gov. Code, § 12940, subd. (a)), and its 26th cause of action for retaliation (Gov. Code, § 12940, subd. (h)), against Rubicon and GBI.
DISMISSAL OF COMPLAINT AS TO NONDEMURRING DEFENDANTS
The Bettingens' final argument, comprised of three sentences unsupported by any legal analysis or citation to authorities, is that the trial court erred by sustaining the demurrer as to Brown and Riviello because they had not filed demurrers and both had answers on file. As with so many of the Bettingens' other contentions, the utter lack of any legal analysis waives the argument. (Benach, supra, 149 Cal.App.4th at p. 852, fn. omitted ["When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived"].)
DISPOSITION
The judgment is reversed as to defendants Rubicon, GBI, and Mangiapane, and the matter is remanded to the trial court with directions to enter a new order overruling the demurrer to the SACC as to the following causes of action only: (1) breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief (1st through 5th and 23d causes of action) against Rubicon and GBI; (2) defamation against Mangiapane (16th cause of action); and (3) the FEHA causes of action for discrimination and retaliation in violation of the FEHA (25th and 26th causes of action) against Rubicon and GBI. The judgment is affirmed as to individual defendants Scott, Herring, Kessler, Davis, Vande Hei, Brown, and Riviello. In the interests of justice, the parties shall bear their own costs on this appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
O'LEARY, J. WE CONCUR: RYLAARSDAM, ACTING P. J. IKOLA, J.