51 Cal.App.5th 556
Cal. Ct. App.2020Background
- Daniel Bornstein and Amy Wittenberg were the two co‑owners/managing members of Hertzel Enterprises LLC; multiple related lawsuits were filed among family members and affiliated entities between 2016–2018.
- Daniel filed an action (the 541 action) seeking dissolution of a law partnership and later filed a cross‑complaint seeking involuntary dissolution and an accounting of Hertzel.
- Wittenberg (and Jonathan Bornstein) later filed pleadings alleging that Daniel and others diverted Hertzel funds and usurped investment opportunities; Wittenberg also filed a separate action (the 949 action) asserting individual and derivative claims on Hertzel’s behalf.
- The trial court sustained Daniel’s demurrer to Wittenberg’s first amended complaint in the 949 action without leave to amend under the compulsory cross‑complaint statute (Code Civ. Proc. § 426.30) and dismissed all causes of action against Daniel.
- On appeal, the court considered (1) whether Wittenberg forfeited several new legal arguments raised for the first time on appeal, and (2) whether the claims in the 949 action were barred as "related" causes of action that should have been pleaded as compulsory cross‑claims in the 541 action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wittenberg may raise new legal theories on appeal to defeat a demurrer based on the compulsory cross‑complaint statute | Gutierrez requires appellate courts to consider any legal theory supporting the claim even if raised first on appeal | Arguments not raised below are forfeited; court may decline to consider new theories | Forfeited: court may refuse to consider new legal arguments; here Wittenberg forfeited several new theories and, even if considered, they lacked merit |
| Whether a demurrer under the compulsory cross‑complaint statute is the kind of general demurrer that Gutierrez governs | Gutierrez applies because demurrer can be general | Demurrer here challenged procedural form (piecemeal litigation), not factual sufficiency; Gutierrez inapplicable | Gutierrez’s "any possible legal theory" rule does not compel consideration of new legal theories when demurrer contests form/relatedness under compulsory‑cross statute |
| Whether dissolution/accounting of an LLC are "special proceedings" exempting the compulsory cross‑complaint rule | Dissolution/accounting are statutory special proceedings, so §426.60(a) excludes them | Accounting is equitable (not a special proceeding) and dissolution/accounting were part of consolidated litigation | Not special proceedings for §426 purposes; accounting is equitable and claims were part of broader litigation, so statute applies |
| Whether trial court lacked jurisdiction to enter a personal judgment against Wittenberg | Wittenberg argued lack of personal/jurisdictional basis | Wittenberg was domiciled in California and had answered Daniel’s cross‑complaint—submitted to jurisdiction | Court had personal jurisdiction; jurisdictional objection fails |
| Whether Hertzel (not named as a cross‑defendant in Daniel’s cross‑complaint) avoids the compulsory cross‑complaint bar for derivative claims | Hertzel’s absence from Daniel’s cross‑complaint means derivative claims can be litigated separately | Wittenberg, as the only other member, could have and should have asserted derivative claims in the same proceeding | Derivative and individual claims were related to Daniel’s cross‑complaint and therefore barred from being asserted in a separate action |
| Whether fraud‑based and other claims were not yet "had" at time of answer because of delayed discovery (thus outside §426.30) | Delayed discovery means she did not "have" the claims when she answered Daniel’s FACC | Argument was not raised below and thus forfeited; no authority that delayed discovery alters §426.30 timing | Forfeited and unsupported; compulsory‑cross rule still applies |
Key Cases Cited
- Gutierrez v. Carmax Auto Superstores of California, 19 Cal.App.5th 1234 (Cal. Ct. App. 2018) (appellate courts may consider new legal theories to sustain a pleading challenged by general demurrer)
- Align Technology, Inc. v. Tran, 179 Cal.App.4th 949 (Cal. Ct. App. 2009) (independent review of compulsory cross‑complaint demurrer and relatedness test)
- Carroll v. Import Motors, Inc., 33 Cal.App.4th 1429 (Cal. Ct. App. 1995) (compulsory cross‑complaint statute aims to prevent piecemeal litigation)
- Bogacki v. Board of Supervisors, 5 Cal.3d 771 (Cal. 1971) (issues not raised in trial court are generally forfeited on appeal)
- Flickinger v. Swedlow Engineering Co., 45 Cal.2d 388 (Cal. 1955) (litigation must avoid splitting claims or piecemeal trials)
- ZF Micro Devices, Inc. v. TAT Capital Partners, Ltd., 5 Cal.App.5th 69 (Cal. Ct. App. 2016) ("logical relationship" standard for related causes of action under compulsory cross‑complaint statute)
- JRS Products, Inc. v. Matsushita Electric Corp. of America, 115 Cal.App.4th 168 (Cal. Ct. App. 2004) (fairness: appellate courts avoid reversing on grounds the opposing party lacked chance to argue below)