BEHNAM HESHEJIN et al., Plaintiffs and Appellants, v. RAMI ROSTAMI et al., Defendants and Respondents.
B297037
Court of Appeal of the State of California, Second Appellate District, Division Seven
September 22, 2020
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. No. BC693226)
APPEAL from a judgment of the Superior Court of Los Angeles County, Patricia G. Nieto, Judge. Affirmed.
Gutierrez, Preciado & House and Calvin House for Plaintiffs and Appellants.
Novian & Novian, Farhad Novian and Andrew B. Goodman for Defendants
Behnam Heshejin, Eric Anvari, the Hestfam Family Trust, and trustee David A. Enzmann (plaintiffs) appeal from an order of dismissal entered as to American Investment Group, LLC (AIG), Avalon Cold Storage, LLC (Avalon), and AIG’s director and managing member Rami Rostami (collectively, AIG defеndants) after the trial court sustained without leave to amend the AIG defendants’ demurrer to plaintiffs’ second amended complaint. The second amended complaint asserted derivative causes of action on behalf of American Logistics International, LLC (ALI) against AIG for
The trial court held plaintiffs lacked standing to assert double derivative claims1 on behalf of ALI based on their minority ownership interest in ALI’s parent company and sole owner, Mazkat Ventures, LP (Mazkat); plaintiffs failed to assert the claims on behalf of ALI in a compulsory cross-complaint (
FACTUAL AND PROCEDURAL BACKGROUND
A. Plaintiffs’ Second Amended Complaint
Plaintiffs initiated this action against the AIG defendants and others on February 7, 2018. After the trial court sustained the AIG defendants’ demurrer to the first amended complaint with leave to amend, plaintiffs filed the operative second amended complaint on November 1, 2018. The second amended complaint alleged 12 causes of action, six of which were asserted as derivative causes of action on behalf of ALI against AIG for conspiracy to commit fraud (first cause of action); fraud by concealment (second cause of action); breach оf fiduciary duty (third cause of action); declaratory relief (fifth cause of action); conversion (sixth cause of action), and accounting (seventh cause of action).4
The second amended complaint alleged plaintiffs are limited partners in Mazkat, with a combined ownership interest of about 19.5 percent. Mazkat in turn wholly owns ALI.
American Logistics Advisors, LLC (ALA), is a general partner with a controlling interest in Mazkat. Defendants Ramin
B. The Joint Venture6
In February 2009 ALI received approval to operate as a regional center within the immigrant investor pilot program, known as EB-5. Between February 2009 and November 2018, ALI received about $25 million in investments from individual immigrants ($500,000 each from 50 EB-5 investors) seeking to obtain residence visas for the United States under the program.
Between 2009 and 2013, Bagherzadeh formed 10 or more limited partnerships or limited liability companies, including American Logistics International Warehousing & Distribution, LLC (ALIWD), in July 2011; American Logistics International Cold Storage, LLC (which later became Avalon), American Logistics International Cold Storage, LP (ALI Cold Storage), and American Logistics International Fulfillment, LLC, in May 2013; and American Logistics International Fulfillment, LP (ALI Fulfillment), in July 2013. ALI is the sole owner and general partner of ALI Cold Storage. Since its creation, Bagherzadeh has managed ALIWD. From May 2013 until February 2015
Bagherzadeh was also chief executive officer of Avalon’s predecessor company, and he was in chargе of operations, marketing, and accounting.
In November 2012 Rostami and Bagherzadeh started discussing a joint venture between ALI and AIG for the creation of a cold storage and fulfillment business (joint venture). The facility would be in the name of ALI Cold Storage with a fulfillment facility under the name of ALI Fulfillment. In May 2013 ALI began to sell partnership interests in ALI Cold Storage and ALI Fulfillment to EB-5 investors for the creation of a cold storage business.
On July 30, 2013 Rostami and Bagherzadeh signed a joint venture agreement on behalf of AIG and ALI, respectively.7 Under the agreement, AIG was to invest $6 million in the joint venture. If ALI Cold Storage and ALI Fulfillment failed to generate enough capital from EB-5 investors, then $4.5 million of AIG’s investment would be considered a loan to ALI Cold Storage and ALI Fulfillment. In October 2013 Rostami created an operating agreement for Avalon, designating ALI Cold Storage as Avalon’s sole owner.
agreement that restructured the joint venture and converted AIG’s investment into “equity purchase of shares into [Avalon],” giving AIG a 75 percent ownership interest in Avalon; a second unit purchase agreement under which ALIWD purchased the remaining 25 percent membership interest in Avalon for $2.5 million; and a new operating agreement for Avalon designating AIG and ALIWD as Avalon’s only members, in place of ALI Cold Storage.
The second amended complaint alleged these actions were taken by Rostami, Bagherzadeh, AIG, and ALIWD as part of a conspiracy to divest ALI of its partnership interest and rights in the joint venture, and they concealed those efforts from the owners and managers of ALI and Mazkat. Further, Bagherzadeh acted in the interest of AIG, not ALA, Mazkat, or ALI.
C. AIG v. Mahdavi8
On May 22, 2017 AIG, Avalon, and American Logistics International Fulfillment, LLC, filed the AIG v. Mahdavi action against Mahdavi, ALI, ALIWD, and others, asserting claims in connection with the joint venture. AIG asserted a cause of action against ALI for breach of contract, and Avalon asserted causes of action against Mahdavi, ALI, and the other defendants for unjust enrichment, allocation and contribution, equitable indemnity, and declaratory relief. The complaint alleged Mahdavi induced AIG to invest in the joint venture, ALI breached the terms of the July 2013 joint venture agreement between AIG and ALI and Avalon’s October 2013 operating agreement, and Mahdavi used
his position as de facto manager of Avalon to transfer Avalon’s assets to himself, ALI, ALIWD, and others.
ALI and Mahdavi, through their attorney, Martin Jacobs, filed an answer on August 1, 2017. Mahdavi did not inform Mazkat or its partners that ALI had been sued. Plaintiffs first learned of the AIG v. Mahdavi action on January 22, 2018 from Rostami’s deposition testimony in another lawsuit. On January 23 Jacobs filed a motion to be relieved as counsel. The second amended complaint alleged that even if ALI had informed plaintiffs of the AIG v. Mahdavi action, because of the alleged misconduct of its managers
D. Defendants’ Demurrer
The AIG defendants demurred to the first, second, third, fifth, sixth, and seventh causes of action alleged in the second amended complaint, arguing plaintiffs lacked standing to bring derivative claims; plaintiffs’ derivative claims were barred by ALI’s failure to file a cross-complaint in the AIG v. Mahdavi action; and the second amended complaint failed to state facts sufficient to constitute the challenged causes of action. The AIG defendants requested judicial notice of the May 22, 2017 complaint filed in AIG v. Mahdavi and ALI’s August 1, 2017 answer.
After a hearing, on December 21, 2018 the trial court sustained the AIG defendants’ demurrer without leave to amend. The court also granted the AIG defendants’ request for judicial notice of the complaint and ALI’s answer filed in AIG v. Mahdavi
action. In its written ruling, the court found plaintiffs lacked standing to assert double derivative claims on behalf of ALI as minority partners of Mazkat; plaintiffs failed adequately to plead their efforts to secure action from ALI’s managers or the reasons for not making that effort; plaintiffs’ derivative claims on behalf of ALI were barred by the compulsory cross-complaint rule because ALI filed an answer in the AIG v. Mahdavi action; and plaintiffs’ derivative causes of action were not adequately pleaded.
Plaintiffs timely appealed.
DISCUSSION
A. Plaintiffs’ Appeal Is Timely
On April 15, 2019 plaintiffs filed a notice of appeal purporting to appeal from the trial court’s December 21, 2018 “judgment of dismissal” sustaining the demurrer. On June 6, 2019 the AIG defendants filed a motion to dismiss the appeal as untimely, arguing plaintiffs filed their appeal more than 60 days after the AIG defendants served plaintiffs with notice of the trial court’s December 21, 2018 order sustaining the demurrer. (See Cal. Rules of Court, rule 8.104(a)(1)(A), (B) [where a party serves the notice of entry of judgment, the notice of appeal must be filed on or before “60 days after the party filing the notice of appeal serves or is served by a party with a document entitled ‘Notice of Entry’ of judgment or a filed-endorsed coрy of the judgment, accompanied by proof of service,” unless the superior court clerk had earlier
February 19, 2019 and March 19, 2019, but both were rejected by the clerk of the superior court due to missing information.
On July 17, 2019 this court denied the AIG defendants’ motion to dismiss this appeal as untimely but stated “the appeal will be dismissed as taken from a non-appealable order unlеss [plaintiffs] provide a signed order of dismissal on or before August 6, 2019.” On July 22, 2019 plaintiffs filed an order of dismissal entered that day, dismissing plaintiffs’ action as to the AIG defendants with prejudice and ordering that plaintiffs “take nothing as against those defendants.”
In their respondents’ brief, the AIG defendants argue for dismissal of the appeal, contending the appeal is taken from a nonappealable order because the underlying action is ongoing as to the remaining defendants. Alternatively, the AIG defendants renew their assertion plaintiffs’ appeal is untimely because it was filed more than 60 days after the AIG defendants served plaintiffs with a file-stamped order sustaining the demurrer without leave to amend. Neither contention has merit.
As to the AIG defendants’ first contention, “it has long been the settled rule that in a case involving multiple parties, a judgment is final and appealable when it leaves no issues to be determined as to one party.” (Dakota Payphone, LLC v. Alcaraz (2011) 192 Cal.App.4th 493, 506; accord, Justus v. Atchison (1977) 19 Cal.3d 564, 568 [“the rule requiring dismissal [of an interlocutory appeal] does not apply when the case involves multiрle parties and a judgment is entered which leaves no issue to be determined as to one party”], disapproved on another ground by Ochoa v. Superior Court (1985) 39 Cal.3d 159, 171; Millsap v. Federal Express Corp. (1991) 227 Cal.App.3d 425, 430.) Thus, the rule that an appeal may not be taken from
interlocutory judgment does not apply in this case where the July 22, 2019 signed order of dismissal left no issue to be determined as to the AIG defendants.
As to the AIG defendants’ second contention, plaintiffs’ April 15, 2019 notice of appeal purported to appeal from the minute order sustaining the demurrer without leave to amend, which was not an appealable order. But we trеat the notice of appeal as a premature but valid appeal from the subsequent order of dismissal, “as filed immediately after entry of judgment.”9 (Cal. Rules
B. Standard of Review
“In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory. [Citation.] Where the demurrer was sustained without leave to amend, we consider whether the plaintiff could cure the defect by an amendment.” (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162; accord, Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.) When evaluating the complaint, “we assume the truth of the allegations.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1230; accord, McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) “A judgment of dismissal after a
demurrer has been sustained without leave to amend will be affirmed if proper on any grounds stated in the demurrer, whether or not the court acted on that ground.” (Carman v. Alvord (1982) 31 Cal.3d 318, 324; accord, Summers v. Colette (2019) 34 Cal.App.5th 361, 367.)
A trial court abuses its discretion by sustaining a demurrer without leave to amend where “‘there is a reasonable possibility that the defect can be cured by amendment.’” (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100; accord, City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) “‘The plaintiff has the burden of proving that [an] amendment would cure the legal defect, and may [even] meet this burden [for the first time] on appeal.’” (Sierra Palms Homeowners Assn. v. Metro Gold Line Foothill Extension Construction Authority (2018) 19 Cal.App.5th 1127, 1132; accord, Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 971.)
“‘[A] demurrer based on an affirmative defense will be sustained only where the face of the complaint discloses that the action is necessarily barred by the defense.’” (Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 191; accord, Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191 [application on demurrer of affirmative defense of statute of limitations based on facts alleged in a complaint is a legal question subject to de novо review]; Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 224 [“‘It must appear clearly and affirmatively that, upon the face of the complaint [and matters of which the court may properly take judicial notice], the right of action is necessarily barred.’”].)
C. Plaintiffs’ Derivative Claims Are Barred by the Compulsory Cross-complaint Rule
“The compulsory cross-complaint statute is designed to prevent ‘piecemeal litigation.’” (Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 564; accord, Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 959 (Align Technology).) As the Wittenberg court explained, “‘The law abhors a multiplicity of actions, and the obvious intent of the Legislature in enacting the counterclaim statutes [citations] was to provide for the settlement, in a single action, of all conflicting claims between the parties arising out of the same transaction. [Citation.] Thus, a party cannot by negligence or design withhold issues and litigate them in successive actions; he may not split his demands or defenses; he may not submit his case in piecemeal fashion.’” (Wittenberg, at p. 564; accord, Align Technology, at p. 959.) The statute is to be liberally construed to advance its purpose. (Chao Fu, Inc. v. Chen, supra, 206 Cal.App.4th at p. 56; accord, Align Technology, at p. 959.)
“The rеlated cause of action must be one that was in existence at the time of service of the answer (
contract context, the rule means any claims the defendant has against the plaintiff based on the same contract generally must be asserted in a cross-complaint, even if the claims are unrelated to the specific breach or breaches that underlie the plaintiff‘s complaint.” (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 538.)
Plaintiffs do not dispute the derivative claims10 they assert on behalf of ALI existed at the time ALI served and filed its answer in AIG v. Mahdavi. Nor do plaintiffs dispute their derivative claims relate to the causes of action AIG alleged against ALI in the AIG v. Mahdavi complaint, which arose from the same joint venture. Rather, plaintiffs argue
(
action . . . does not transfer the cause of action from the corporation to the shareholders. Rather, the cause of action in a shareholder derivative suit belongs to and remains with the corporation. Such a lawsuit is derivative, i.e., brought in the ‘corporate right,’ to recompense the corporation for injuries done to it.”]; Scarbourough v. Briggs (1947) 81 Cal.App.2d 161, 166 (Scarbourough) [“The corporation, being the ultimate beneficiary of such a suit, is the real party plaintiff, and the particular stockholders who bring the action are mere nominal parties.”].) Because plaintiffs “‘stand in the shoes’” of ALI in seeking redress for ALI’s injuries, they are generally subject to the procedural rules that would apply to ALI as plaintiff in a direct action. (McDermott, Will & Emery, at p. 383 [“It is the corporation, and not the shareholder, who is the holder of the [corporation’s attorney-client] privilege.”].)
Because the right of action belongs to the corporation, not its shareholders or members, it may be forfeited, waived, or adjudicated by the direct actions of the corporation. Scarbourough, supra, 81 Cal.App.2d 161 is instructive. There, plaintiffs brought a derivative shareholder actiоn on behalf of the corporate entity, Security Home Estates, against individual defendant N.A. Ross, Jr., seeking to declare void the sale of real property. (Id. at pp. 162-164.) Ross asserted res judicata as an affirmative defense, and following a trial, the trial court entered judgment for Ross based on evidence of a consolidated judgment in two previous actions between Security and Ross adjudicating the validity of the sale of the same real property. (Id. at
(Id. at p. 166.) The Court of Appeal rejected the argument, reasoning “[t]he present action is concededly brought by plaintiffs, not individually but as shareholders of Security as a derivative or representative action against Ross, other shareholders and the corporation itself. . . . [Citations.] Under such circumstances plaintiffs herein are brought within the rule that shareholders of a corporation are in privity with it and, in the absence of fraud, are bound by all judgments rendered against the corporation.” (Id. at p. 166.)12
Plaintiffs’ attempts to distinguish the reasoning of Patrick, supra, 167 Cal.App.4th at page 1004 and Beachcomber, supra, 13 Cal.App.5th at page 1118 are not persuasive. In Patrick, the Court of Appeal held a nominal defendant corporation may not demur to a derivative action filed on its
behalf “except on limited grounds such as the shareholder plaintiff’s lack of standing” because “the corporation has no ground to challenge the merits of a derivative claim filed on its behalf and from which it stands to benefit.” (Patrick, at pp. 999, 1005.) In Beachcomber, shareholder plaintiffs brought a derivative action on behalf of a nominal defendant corporation against its managers. (Beachcomber, at p. 1113.) The trial court disqualified the attorney for the corporation’s managers based on a presumption the attorney possessed confidential information obtained during the attorney’s representation of the corporation in an earlier action. (Id. at p. 1114.) The Court of Appeal granted a petition for writ of mandate and directed thе trial court to vacate its disqualification order in light of new authority supplanting application in a derivative action of a presumption the attorney possesses confidential information from prior representation of the corporation, and to determine whether on the facts of the case the attorney could continue to represent the managers. (Id. at p. 1124.) Neither case involved the compulsory counter-complaint rule,
DISPOSITION
The judgment is affirmed. The AIG defendants are to recover their costs on appeal.
FEUER, J.
We concur:
PERLUSS, P. J.
DILLON, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.