Motion for Summary Judgment/Adjudication (Judge Theodore C. Zayner)

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Case Name: ?? Evan Weaver v. Tampa Investment Group, LLC, et al.

Case No.:??????? 2012-1-CV-217949

This action arises from a failed transaction between plaintiff/cross-defendant Evan Weaver (?Weaver?), an early employee of Twitter, Inc. (?Twitter?), and defendant/cross-complainant Tampa Investment Group, LLC (?Tampa?). The transaction involved the sale of Weaver?s shares of pre-IPO Twitter stock to Tampa and a commission payable to defendant Halcyon Cabot Partners Ltd. (?Halcyon?) if Twitter exercised its right of first refusal (?ROFR?). The terms of the deal are set forth in a letter of intent (?LOI?) and fee contract (?Term Sheet?). Weaver asserts that Paul McCabe (?McCabe?) and defendant John Binova (?Binova?) fraudulently induced him to execute the LOI and Term Sheet and to perform as agreed. He also alleges that Tampa and defendant Felix Investments, LLC (?Felix?) are alter egos, and that Tampa, Felix, Halcyon, and Binova (collectively, ?Defendants?) aided and abetted one another and/or and acted in furtherance of a conspiracy or agency. In the first amended complaint (?FAC?),[1] Weaver asserts causes of action for (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) fraud; (4) negligent misrepresentation; (5) breach of fiduciary duty; and (6) professional negligence.

Felix and Binova (collectively, ?Moving Defendants?) move for summary judgment or, in the alternative, summary adjudication of the first five causes of action, and make a request for judicial notice in support thereof. (See Code Civ. Proc. [?CCP?], ??437c.) Weaver opposes the motion, makes a request for judicial notice in support of the opposition, and submits objections to Moving Defendants? evidence. With the reply, Moving Defendants submit objections to Weaver?s evidence. Also, on the date of the filing of the reply, Tampa filed a notice of joinder.

  1. Joinder

Tampa?s joinder is DENIED. (See Barak v. Quisenberry Law Firm (2006) 135 Cal.App.4th 654, 660-661; see also Village Nurseries, L.P. v. Greenbaum (2002) 101 Cal.App.4th 26, 47.)

  1. Judicial Notice

Moving Defendants? request for judicial notice in support of the motion is GRANTED. (See Evid. Code, ??452, subd. (d); see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn.?2.)

Weaver?s request for judicial notice in support of the opposition is GRANTED. (See Evid. Code, ??452, subds. (c)-(d); see also People ex rel. Lockyer v. Shamrock Foods Co., supra, 24 Cal.4th, at p. 422, fn.?2; see also Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301.)

III.?????? Motion for Summary Judgment or, in the Alternative, Summary Adjudication

  1. Merits of the Motion for Summary Judgment

In ruling on a motion, the court must first identify the issues framed by the pleadings. (Kelly v. First Astri Corp. (1999) 72 Cal.App.4th 462, 470.) The court ?must consider the different causes of action differently, with respect to the factually specific allegations against each defendant.? (Howard v. Omni Hotels Management Corp. (2012) 203 Cal.App.4th 403, 422.) In the FAC, Weaver asserts six causes of action without expressly stating which claim is asserted against each defendant. Based on the allegations, it is clear that all six causes of action are asserted against all Defendants, based either on their own acts or omissions or allegations of agency, conspiracy, alter ego, and/or aiding and abetting. (FAC, ???6-8, 10, 21, & 71-114.)

To be entitled to summary judgment, Moving Defendants must respond to each of the six causes of action set forth in the FAC. (See Hutton v. Fidelity National Title Company (2013) 213 Cal.App.4th 486, 493; see also Nativi v. Deutsche Bank National Trust Company (2014) 223 Cal.App.4th 261, 289-290; see also McCaskey v. Cal. State Auto. Assn. (2010) 189 Cal.App.4th 947, 957; see also CCP, ??437c, subds.?(a)(1) & (c).) Since Moving Defendants do not address the sixth cause of action for professional negligence, they have not met their burden. Moving Defendants? motion for summary judgment is accordingly DENIED.

  1. Merits of the Motion for Summary Adjudication of the First Five Causes of Action

Alternatively, Moving Defendants seek summary adjudication of the first five causes of action. A defendant moving for summary judgment bears the burden to show that a cause of action has no merit by presenting evidence to show that one or more elements of a cause of action cannot be established or that there is a complete defense thereto. (CCP, ??437c, subd.?(p)(2).) To show that an element cannot be established, the defendant must present affirmative evidence to either: (a) negate an element, or (b) show that the plaintiff does not possess and cannot reasonably obtain needed evidence. (Guz v. Bechtel Nat?l, Inc. (2000) 24 Cal.4th 317, 334; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854-855.) Moving Defendants do not attempt to establish a defense or to show that Weaver does not possess and cannot obtain evidence; rather, they argue that their evidence negates one or more essential elements of the first five causes of action.

  1. Summary Adjudication of the First & Second Causes of Action

A claim for breach of contract requires, amongst other things, the existence of a contract and breach. (Reichert v. General Ins. Co. of America (1968) 68 Cal.2d 822, 830.) A claim for breach of the implied covenant of good faith and fair dealing also requires the existence of a contract. (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1032.) Moving Defendants argue that Weaver cannot establish the essential element of the existence of a contract in support of both claims, and further argue that Weaver cannot establish the element of breach in support of the breach of contract claim.

Moving Defendants assert that Weaver cannot prove the existence of a binding contract for Tampa to purchase his shares of Twitter stock because the LOI and Term Sheet should be interpreted as a single non-binding agreement to agree in the future. ?Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.? (Civ. Code, ? 1642; see also Versaci v. Superior Court (2005) 127 Cal.App.4th 805, 814.) In their separate statement of undisputed material fact (?UMF?), Moving Defendants rely on exhibits attached to the FAC to show that the LOI and the Term Sheet were executed on the same date, relate to the same subject matter, and clearly reference obligations imposed on Tampa. (Moving Defendants? UMF re: First & Second Causes of Action Nos.?12-15, citing FAC, Exs.?A-B.) Moving Defendants? evidence is therefore sufficient to show that the LOI and Term Sheet should be construed as one instrument.

An agreement to agree is not a binding contract that may support a cause of action. (Beck v. American Health Group International, Inc. (1989) 211 Cal.App.3d 1555, 1562.) Moving Defendants? evidence shows that the LOI expressly states that it is non-binding, but the Term Sheet does not indicate that it is non-binding. (Moving Defendants? UMF re: First Cause of Action Nos.?12-15, citing FAC, Exs.?A-B.) Therefore, the face of the LOI and Term Sheet demonstrates the existence of a triable issue of material fact as to whether the parties intended for both the LOI and the Term Sheet to be non-binding.

Furthermore, the trial court must consider extrinsic evidence in ruling on motion for summary judgment or adjudication. (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1350-1351.) Where ?two equally plausible interpretations of the language of a contract may be made?.?.?. parol evidence is admissible to aid in interpreting the agreement, thereby presenting a question of fact which precludes summary judgment if the evidence is contradictory.? ([Citation].)? (Id., at p.?1351.) Moving Defendants? extrinsic evidence also discloses a conflict as to whether the parties intended for the non-binging language in the LOI to apply to the terms set forth in the Term Sheet. (Moving Defendants? UMF re: First & Second Causes of Action Nos.?3-9 & 12-15; Weaver?s Ex. 28[2]; Moving Defendants? UMF re: Third & Fourth Causes of Action No.?19; Weaver?s depo.; Moving Defendants? Ex.?20, pp.?1 & 3.) Thus, Moving Defendants? extrinsic evidence additionally demonstrates the existence of a triable issue of material fact. To summarize, Moving Defendants have not met their burden in support of the motion as to the element of the existence of a contract.

Turning to the element of breach, Moving Defendants argue that Weaver cannot establish that Tampa breached the provision that required it to work in good faith to execute definitive documentation. Their evidence shows that after all conditions precedent to Tampa?s performance had occurred, Tampa told Weaver that it would not be able to purchase his stock. (Moving Defendants? UMF re: First Cause of Action Nos.?16-18 & 20.) This evidence do not negate the element of breach because it does not show that Tampa worked in good faith and used best efforts to finalize and execute definitive documentation. Therefore, Moving Defendants have not met their burden in support of the motion as to the element of breach.

Since Moving Defendants have not presented sufficient evidence to meet their initial burden, Weaver is not obligated to proffer any evidence in opposition. (See CCP, ??437c, subd.?(p)(2).) In light of the foregoing, Moving Defendants? motion for summary adjudication of the first and second causes of action is DENIED.

  1. Summary Adjudication of the Third & Fourth Causes of Action

Weaver?s third cause of action for fraud and fourth cause of action for negligent misrepresentation are claims for fraud. (See Civ. Code, ???1709-1710.) The elements of intentional fraud/concealment and negligent misrepresentation include: misrepresentation (false representation, concealment, or nondisclosure); actual and justifiable reliance; and resulting damage. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974; Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 196.) Moving Defendants argue that Weaver cannot each of these elements.

Moving Defendants assert that McCabe?s allegedly false misrepresentation regarding the non-binding nature of the LOI and Term Sheet was a non-actionable opinion. This argument lacks merit because their evidence shows that McCabe either had or held himself out as having superior knowledge of the matter and did not make a representation as to value, quality, or other matters of judgment. (Moving Defendants? UMF re: Third & Fourth Causes of Action No.?19; see Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 606-607; see also Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal.App.4th 303, 308; see also Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 892-893.) Thus, Moving Defendants? evidence is insufficient to demonstrate that McCabe?s statement was a non-actionable opinion. In any event, to meet their initial burden, Moving Defendants must proffer evidence to show that an element cannot be established with respect to each alleged misrepresentation. (See CCP, ??437c, subds.?(f)(1) & (p)(2); see also McCaskey v. Cal. State Auto. Assn., supra, 189 Cal.App.4th, at pp.?957 & 975; see also Lopez v. Super. Ct. (1996) 45 Cal.App.4th 705, 717.) Weaver alleges multiple fraudulent misrepresentations concerning various material facts. (FAC, ???5, 8-10, 29-43, 48-52, 55-65, & 84-99.) Since Moving Defendants do not address all of the alleged misrepresentations, they have not met their burden to negate the element of misrepresentation.

Turning to reliance, a plaintiff asserting a fraud claim must establish that his actual and justifiable reliance on the misrepresentation caused him to take a detrimental course of action. (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1062.) The question of whether reliance was justifiable is a question of fact that may be decided as a matter of law only if reasonable minds can come to only one conclusion based on the facts. (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843.) In determining whether reliance was justifiable, the plaintiff?s knowledge should be considered. (See id., at pp.?843-844; see also Seeger v. Odell (1941) 18 Cal.2d 409, 415.) Moving Defendants? evidence shows that McCabe sometimes communicated with Weaver using his Felix email address, some of his emails ended with a boilerplate disclosure that referred to Felix?s email system, and he advised that he was licensed with Felix and Halcyon and could receive emails through both companies? systems. (Moving Defendants? UMF re: Third & Fourth Causes of Action Nos.?6-7, 11-12, & 14.) Even so, this evidence does not suggest that Weaver knew that Felix was involved in the transaction. Such evidence is insufficient to show that Weaver?s reliance was unreasonable as a matter of law. (See Guido v. Koopman, supra, 1 Cal.App.4th, at pp.?843-844.) Additionally, Moving Defendants argue that Weaver?s reliance on McCabe?s alleged misrepresentations concerning Tampa?s funding and the non-binding nature of the LOI and Term Sheet was not reasonable. They proffer evidence showing that Weaver thought that McCabe was ?shady? and consulted with his attorney during negotiations. (Moving Defendants? UMF re: Third & Fourth Causes of Action Nos.?8 & 17-18.) This does not show that Weaver?s reliance was unreasonable as a matter of law. (See Guido v. Koopman, supra, 1 Cal.App.4th, at pp.?843-844.) Moving Defendants further argue that Weaver?s reliance was not justified because the LOI was non-binding. Even so, Moving Defendants? evidence suggests that McCabe induced Weaver to execute the LOI by indicating that the non-binding provision existed only to protect the seller if Twitter exercised the ROFR, and that the LOI would be binding against Tampa. (E.g., Moving Defendants? UMF re: Third & Fourth Causes of Action Nos.?14-21 & 24-25; Moving Defendants? Ex.?20.) Thus, Moving Defendants? evidence demonstrates that reasonable minds may differ as to whether Weaver?s reliance was reasonable. Their evidence is therefore insufficient to negate the element of justifiable reliance. (See Guido v. Koopman, supra, 1 Cal.App.4th, at p.?843.)

Lastly, a plaintiff must establish that his reliance caused his alleged damage. (Beckwith v. Dahl, supra, 205 Cal.App.4th, at p.?1062.) No liability attaches if the damages sustained were otherwise inevitable or due to unrelated causes, or if the representation cannot possibly affect the intrinsic merits of a business transaction and the plaintiff does not plead and prove that the fraud affected the value of the property or services bargained for. (Id., at p.?1064; Hill v. Wrather (1958) 158 Cal.App.2d 818, 824-825.) Moving Defendants? evidence shows that the LOI expressly states that it is binding; however, their evidence also indicates that Weaver relied on McCabe?s allegedly fraudulent misrepresentations regarding the binding effect of the transaction when he resigned from Twitter and entered into the LOI and Term Sheet. (Moving Defendants? UMF re: Third & Fourth Causes of Action Nos.?1-6, 13-20, & 22-27; Moving Defendants? Ex.?23.) The fact that the LOI expressly states that it is binding does not negate the element of resulting damages, given that the basis of the fraud claims is that McCabe fraudulently induced Weaver to execute the LOI. Therefore, Moving Defendants? evidence is insufficient to negate the element of resulting damages.

To summarize, Moving Defendants have not met their initial burden in support of the motion as to the third and fourth causes of action. (See CCP, ??437c, subd.?(p)(2).) Thus, Weaver is not obligated to proffer evidence in opposition. (See ibid.) Accordingly, Moving Defendants? motion for summary adjudication of the third and fourth causes of action is DENIED.

  1. Summary Adjudication of the Fifth Cause of Action

Weaver?s fifth cause of action is for conspiring with Halcyon and aiding and abetting Halcyon?s breach of its fiduciary duties. (FAC, ???100-109.) The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) Moving Defendants contend that Weaver cannot establish the elements of existence of a fiduciary duty owed by Halcyon or damage proximately caused by the breach.

If Halcyon owed fiduciary duties to Weaver, then Moving Defendants may be liable for aiding and abetting Halcyon?s breach of fiduciary duties. (See American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1475, 1477-1478.) Fiduciary duties may be imposed by law in certain relationships or undertaken by agreement. (GAB Business Services, Inc. v. Lindsey & Newsom Claim Services, Inc. (2000) 83 Cal.App.4th 409, 416, disapproved on other grounds in Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1154.) Moving Defendants? evidence shows that Halcyon agreed to perform certain duties, but did not agree to perform fiduciary duties. (Moving Defendants? UMF re: Fifth Cause of Action No.?18, citing FAC, Ex.?B.) The remaining issue is whether Halcyon had a fiduciary relationship with Weaver that gives rise to fiduciary duties as a matter of law.

Weaver?s claim is based on the allegation that Halcyon owed fiduciary duties because it offered him investment advice in the course of their confidential investment broker/customer relationship. (FAC, ?? 66-68 & 101-102.) A broker/customer relationship is a fiduciary relationship giving rise to fiduciary duties as a matter of law where the customer relies on the broker?s advice. (Twomey v. Mitchum, Jones & Templeton, Inc. (1968) 262 Cal.App.2d 690, 708-409; Duffy v. Cavalier (1989) 215 Cal.App.3d 1517, 1530-1533.) Fiduciary duties do not arise as a matter of law where the broker/customer relationship was ?confined to the simple performance of transactions ordered by a customer or his investment advisor.? (Petersen v. Securities Settlement Corp. (1991) 226 Cal.App.3d 1445, 1454-1456.) Moving Defendants contend that the broker/customer relationship between Weaver and Halcyon was simple and did not constitute a fiduciary relationship; however, they do not proffer evidence to show that their relationship was limited to merely performing transactions ordered by Weaver. Rather, their own evidence shows that McCabe, on behalf of Halcyon, solicited Weaver to sell his Twitter stock to Tampa and advised Weaver during negotiations. (Moving Defendants? UMF re: Fifth Cause of Action Nos.?1-2, 4-9, & 14-18.) Such evidence shows that Halcyon?s relationship with Weaver was not limited to merely performing transactions ordered by Weaver without the furnishing of any advice. Accordingly, Moving Defendants have not met their initial burden to negate the element of the existence of a fiduciary duty owed by Halcyon.

Finally, with respect to the element of damages proximately caused by the breach, Moving Defendants proffer the same evidence set forth in connection with the fraud claims. (See Moving Defendants? UMF re: Third & Fourth Causes of Action Nos.?6, 11, 14-20, & 22-27; see also Moving Defendants? UMF re: Fifth Cause of Action Nos.?1-10 & 12-17.) As explained above, such evidence does not negate the element of resulting damages.

Thus, Moving Defendants have not met their initial burden, and Weaver is not required to proffer evidence in opposition. (See CCP, ??437c, subd.?(p)(2).) Moving Defendants? motion for summary adjudication of the fifth cause of action is therefore DENIED.

  1. Evidentiary Objections

The Court declines to rule on Weaver?s objections to Moving Defendants? evidence and Moving Defendants? objections to Weaver?s evidence because the objections are not material to the outcome of the motion. (See CCP, ??437c, subd.?(q).)

[1] The FAC was filed in federal court, and the parties assume it is the operative pleading. California courts recently ?have been inclined to give effect to pleadings filed in federal court before remand.? (Laguna Village, Inc. v. Laborers? International Union of North America (1983) 35 Cal.3d 174, 180.) Thus, the Court adopts the parties? approach and gives effect to the FAC.

[2] Moving Defendants persuasively argue that Weaver?s opposing evidence should be considered in determining whether they have met their initial burden. (See Moving Defendants? Reply, at p. 3, fn.?1; see also Villa v. McFerren (1995) 35 Cal.App.4th 733, 751; see also CCP, ??437c, subd.?(c).)