Lopes et al v. Vieira et al, No. 1:2006cv01243 - Document 297 (E.D. Cal. 2010)
Court Description: MEMORANDUM DECISION GRANTING Defendant's Genske Mulder LLP and Downey Brand LLP'S Motions for Summery Judgment Against Plaintiff Antonio Estevam 113 [ and 128 , signed by Judge Oliver W. Wanger on 9/27/2010. (Gaumnitz, R)
Download PDF
<![CDATA[
Lopes et al v. Vieira et al Doc. 297 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT FOR THE 8 EASTERN DISTRICT OF CALIFORNIA 9 10 MANUEL LOPES AND MARIANA LOPES, et al., 11 12 Plaintiffs, 13 vs. 14 15 GEORGE VIEIRA, et al., 16 Defendants. 17 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV-F-06-1243 OWW/SMS MEMORANDUM DECISION GRANTING DEFENDANTS GENSKE MULDER LLP AND DOWNEY BRAND LLP'S MOTIONS FOR SUMMARY JUDGMENT AGAINST PLAINTIFF ANTONIO ESTEVAM (Docs. 113 & 128) 18 Defendants Genske Mulder & Company (“Genske Mulder”) and 19 Downey Brand LLP (“Downey Brand”) respectively move for summary 20 judgment or summary adjudication against Plaintiff Antonio 21 Estevam on the Fourth through Eighth Causes of Action in the 22 Second Amended Complaint (“SAC”). 23 Genske Mulder seeks summary judgment or adjudication: 24 25 26 A. Fourth Cause of Action for securities fraud in violation of the Securities Exchange Act of 1934 on the ground that Plaintiff Estevam did not purchase Valley Gold LLC’s 1 Dockets.Justia.com 1 securities or any other securities; 2 B. Fifth Cause of Action for violation of California securities law on the ground that Plaintiff Estevam did not purchase Valley Gold LLC’s securities or any other securities; 3 4 C. Sixth Cause of Action for negligence on the grounds that Plaintiff Estevam was not a client of Genske Mulder and Genske Mulder did not owe him a duty of care; 5 6 7 D. Seventh Cause of Action for intentional misrepresentation on the grounds that Plaintiff Estevam did not receive or rely on, any material misrepresentation or omission made by Genske Mulder; 8 9 10 E. Eighth Cause of Action for negligent misrepresentation on the grounds the Plaintiff Estevam did not receive or rely on, any material misrepresentation made by Genske Mulder. 11 12 13 Downey Brand seeks summary judgment or adjudication as to 14 the Fourth and Fifth Causes of Action on the grounds that 15 Plaintiff Estevam did not purchase a security; on the Fourth 16 through Eighth Causes of Action on the grounds that Plaintiff 17 Estevam cannot establish that Downey Brand made an affirmative 18 misrepresentation and owed Plaintiff no duty to disclose; and on 19 the Fourth through Eighth Causes of Action on the grounds that 20 Plaintiff Estevam cannot establish reliance or causation. 21 A. GOVERNING STANDARDS. 22 Summary judgment is proper when it is shown that there 23 exists “no genuine issue as to any material fact and that the 24 moving party is entitled to judgment as a matter of law.” 25 Fed.R.Civ.P. 56. A fact is “material” if it is relevant to an 26 2 1 element of a claim or a defense, the existence of which may 2 affect the outcome of the suit. 3 Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th 4 Cir.1987). 5 governing a claim or a defense. 6 inferences drawn from it must be construed in the light most 7 favorable to the nonmoving party. 8 9 T.W. Elec. Serv., Inc. v. Materiality is determined by the substantive law Id. The evidence and all Id. The initial burden in a motion for summary judgment is on the moving party. The moving party satisfies this initial burden 10 by identifying the parts of the materials on file it believes 11 demonstrate an “absence of evidence to support the non-moving 12 party’s case.” 13 (1986). 14 summary judgment. 15 party “may not rely on the mere allegations in the pleadings in 16 order to preclude summary judgment,” but must set forth by 17 affidavit or other appropriate evidence “specific facts showing 18 there is a genuine issue for trial.” 19 may not simply state that it will discredit the moving party’s 20 evidence at trial; it must produce at least some “significant 21 probative evidence tending to support the complaint.” 22 question to be resolved is not whether the “evidence unmistakably 23 favors one side or the other, but whether a fair-minded jury 24 could return a verdict for the plaintiff on the evidence 25 presented.” 26 52 F.3d 810, 815 (9th Cir.1995). Celotex Corp. v. Catrett, 477 U.S. 317, 325 The burden then shifts to the nonmoving party to defeat T.W. Elec., 809 F.2d at 630. Id. The nonmoving The nonmoving party Id. The United States ex rel. Anderson v. N. Telecom, Inc., This requires more than the 3 1 “mere existence of a scintilla of evidence in support of the 2 plaintiff’s position”; there must be “evidence on which the jury 3 could reasonably find for the plaintiff.” 4 implausible the claim or defense asserted by the nonmoving party, 5 the more persuasive its evidence must be to avoid summary 6 judgment.” 7 1769, 1776 (2007), the Supreme Court held: 8 9 10 Id. Id. The more In Scott v. Harris, ___ U.S. ___, 127 S.Ct. When opposing parties tell different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment. 11 As explained in Nissan Fire & Marine Ins. Co. v. Fritz Companies, 12 210 F.3d 1099 (9th Cir.2000): 13 14 15 16 17 18 19 20 21 22 23 The vocabulary used for discussing summary judgments is somewhat abstract. Because either a plaintiff or a defendant can move for summary judgment, we customarily refer to the moving and nonmoving party rather than to plaintiff and defendant. Further, because either plaintiff or defendant can have the ultimate burden of persuasion at trial, we refer to the party with and without the ultimate burden of persuasion at trial rather than to plaintiff and defendant. Finally, we distinguish among the initial burden of production and two kinds of ultimate burdens of persuasion: The initial burden of production refers to the burden of producing evidence, or showing the absence of evidence, on the motion for summary judgment; the ultimate burden of persuasion can refer either to the burden of persuasion on the motion or to the burden of persuasion at trial. 24 25 26 A moving party without the ultimate burden of persuasion at trial - usually, but not always, a defendant - has both the initial burden of production and the ultimate burden 4 of persuasion on a motion for summary judgment ... In order to carry its burden of production, the moving party must either produce evidence negating an essential element of the nonmoving party’s claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial ... In order to carry its ultimate burden of persuasion on the motion, the moving party must persuade the court that there is no genuine issue of material fact .... 1 2 3 4 5 6 7 If a moving party fails to carry its initial burden of production, the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial ... In such a case, the nonmoving party may defeat the motion for summary judgment without producing anything ... If, however, a moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense ... If the nonmoving party fails to produce enough evidence to create a genuine issue of material fact, the moving party wins the motion for summary judgment ... But if the nonmoving party produces enough evidence to create a genuine issue of material fact, the nonmoving party defeats the motion. 8 9 10 11 12 13 14 15 16 17 210 F.3d at 1102-1103. 18 B. STATEMENT OF UNDISPUTED FACTS. 19 1. Genske Mulder 20 a. Fourth Cause of Action for Federal Securities 21 Fraud. 22 GMUDF 1. Plaintiff Estevam did not purchase Valley Gold 23 securities. 24 Plaintiff’s Response: Undisputed. 25 GMUDF 2. Plaintiff Estevam did not receive or read the 26 5 1 Valley Gold Offering Memorandum. 2 Plaintiff’s Response: Undisputed. 3 b. 4 5 6 Fraud. GMUDF 3. Plaintiff Estevam did not purchase Valley Gold securities. Plaintiff’s Response: Undisputed. 7 8 9 Fifth Cause of Action for State Securities GMUDF 4. Plaintiff Estevam did not receive or read the Valley Gold Offering Memorandum. 10 Plaintiff’s Response: Undisputed. 11 c. 12 13 GMUDF 5. Plaintiff Estevam did not retain Genske Mulder as his accountant. Plaintiff’s Response: Undisputed. 14 15 Sixth Cause of Action for Negligence. GMUDF 6. Plaintiff Estevam did not know any of the Genske 16 Mulder personnel in the Central Valley Dairy or Valley Gold 17 engagements. 18 Plaintiff’s Response: Undisputed. 19 d. 20 Misrepresentation. 21 GMUDF 7. 22 25 26 Plaintiff Estevam did not receive or read the Valley Gold Offering Memorandum. Plaintiff’s Response: Undisputed. 23 24 Seventh Cause of Action for Intentional GMUDF 8. Plaintiff Estevam did not receive any representations from Genske Mulder. Plaintiff’s Response: Undisputed. 6 1 GMUDF 9. Plaintiff Estevam did not receive any documents 2 from Genske Mulder. 3 Plaintiff’s Response: Undisputed. 4 e. 5 Misrepresentation. 6 GMUDF 10. 7 10 Plaintiff’s Response: Undisputed. GMUDF 11. Plaintiff Estevam did not receive any documents from Genske Mulder. Plaintiff’s Response: Undisputed. 11 12 Plaintiff Estevam did not receive any representations from Genske Mulder. 8 9 Eighth Cause of Action for Negligent GMUDF 12. Plaintiff Estevam is not able to recall any 13 statement made by Genske Mulder personnel other than a vague 14 statement that “we [CVD] were doing well and were making money.” 15 Plaintiff’s Response: Undisputed. 16 GMUDF 13: When Plaintiff Estevam was not getting paid for 17 his milk, he called Tim Brasil, the President of CVD, who told 18 him that CVD had not been paid. Plaintiff’s Response: Undisputed. 19 20 21 22 23 24 25 26 2. Plaintiff Estevam’s Statement of Additional Undisputed Facts. PEUDF A. Plaintiff Estevam was a member of CVD until June or July, 2005. PEUDF B. In 2004, CVD began paying late for milk that Plaintiff Estevam delivered to Valley Gold. PEUDF C. Plaintiff Estevam continued to ship milk to Valley 7 1 Gold because he believed that the Valley Gold cheese plant was 2 going to be successful. 3 PEUDF D. Plaintiff Estevam’s friends at the other dairies 4 were also having financial problems, but they continued to ship 5 their milk to Valley Gold. 6 Lopes said that they still believed the cheese plant was going to 7 be successful. 8 to ship their milk to Valley Gold, Plaintiff Estevam did too. 9 PEUDF E. Friends like Raymond Lopes and Manuel Because they believed in the plant and continued When Raymond Lopes and Manuel Lopes quit CVD and 10 stopped shipping their milk to Valley Gold, Plaintiff Estevam 11 quit too. 12 13 14 15 2. DBUDF 1. Downey Brand. Downey Brand has never represented Central Valley Dairymen, Inc. Plaintiff’s Response: Disputed. On February 28, 16 2003, Valley Dairymen LLC was formed. 17 CVD in creating that entity, which was a subsidiary of CVD. 18 Declaration of Plaintiffs’ counsel Douglas Applegate, avers that 19 an invoice, dated March 13, 2003, attached as Exhibit X, 20 demonstrates that Downey Brand was hired by CVD’s longstanding 21 counsel, Augustine & Colaw, to form an entity called Valley 22 Dairymen LLC and that Mr. Applegate’s “research indicates that 23 Valley Dairymen, LLC was formed as a wholly owned subsidiary of 24 Central Valley Dairymen.” 25 26 Downey Brand’s Reply: Downey Brand represented The In contending that Downey Brand represented CVD in creating Valley Dairymen, Plaintiffs 8 1 rely on an “unauthenticated, inadmissible” Downey Brand bill sent 2 to Valley Dairymen on March 13, 2003 in care of the law firm, 3 Colaw & Augustine. 4 averment Colaw & Augustine was CVD’s longstanding counsel means 5 that CVD paid for these services is constructed out of thin air. 6 Downey Brand argues that Mr. Applegate’s assertion that Valley 7 Dairymen was a wholly owned subsidiary of CVD is speculative 8 hearsay. 9 fact, Downey Brand asserts that its client would be the entity to Downey Brand asserts that Mr. Applegate’s Even if Mr. Applegate’s speculation is accepted as 10 be formed, Valley Dairymen, LLC, not CVD. 11 California Practice Guide: Professional Responsibility, §§ 12 3:107.2 - 107.4, stating that “out-of-state authorities have 13 reasoned that an attorney-client relationship exists between the 14 attorney and the corporation (not with the individuals) 15 ‘retroactively’ from the time the attorney is retained and the 16 corporation is actually formed (by filing incorporation papers,” 17 § 3:107.2, because “[i]f the person who retains the attorney for 18 the purpose of organizing the corporation is considered the 19 ‘client,’ any subsequent representation of the corporation by 20 that lawyer would automatically amount to dual representation, 21 resulting in the lawyer’s possible disqualification.” § 3:107.3. 22 Downey Brand also cites Strasbourger Pearson Tulcin Wolff Inc. v. 23 Wiz Technology, Inc., 69 Cal.App.4th 1399, 1404 (1999), involving 24 an appeal of the trial court’s order disqualifying plaintiff’s 25 attorney based on the attorney’s having represented plaintiff in 26 connection with a stock offering: “[P]ayment of attorney fees 9 Downey Brand cites 1 alone does not determine an attorney-client relationship; it is 2 merely a factor.” On November 4, 2004, CVD paid a $15,000 retainer to Downey 3 4 Brand for Downey Brand’s work to convert Valley Gold debt into 5 equity. 6 Downey Brand’s Reply: Plaintiffs’ evidence does 7 not create an issue of fact that Downey Brand ever represented 8 CVD. 9 Jeffrey Koewler of Downey Brand to Tony Cary regarding “retainer 10 11 12 13 14 15 16 17 18 Downey Brand submits a letter dated November 12, 2004 from for Valley Gold, LLC:” Enclosed please find check number 013378, which you delivered to Downey Brand, in the amount of $15,000. The check is made out to Downey Brand on a Central Valley Dairymen bank account. As Chris Delfino stated in his voicemail to you on November 12, 2004, we are returning the check to you because our client is Valley Gold, and the matter which you have asked us to assist you involves Valley Gold and Central Valley Dairymen. To avoid any confusion as to who we represent, we cannot accept a check from Central Valley Dairymen. If Valley Gold would like to retain Downey Brand, please have Valley Gold provide us with the retainer check. 19 Downey Brand notes that the accounting report upon which 20 Plaintiffs rely in asserting that Downey Brand was paid $15,000 21 by CVD for work in creating CVD has the handwritten notation that 22 the check was not cashed. 23 24 Court’s Ruling: It is UNDISPUTED that Downey Brand never represented CVD. Plaintiffs’ evidence does not suffice to 25 26 10 1 create a genuine issue of material fact.1 DBUDF 2. 2 3 Plaintiff Estevam did not invest in Valley Gold. Plaintiff’s Response: Undisputed as phrased. 4 Over 5 several years, CVD withheld sums from Plaintiff Estevam’s milk 6 checks, which were placed into a trust to be used for acquiring a 7 cheese plant. 8 ownership interest in Valley Gold in CVD’s name. 9 Estevam had a beneficial interest in CVD’s ownership. 12 Plaintiff Court Ruling: Plaintiff provides no evidentiary 10 11 CVD ultimately used that trust money to acquire an support for this response. DBUDF 3. The fact is UNDISPUTED. Plaintiff Estevam did not read any of the 13 documents associated with the Valley Gold offering to investors 14 or documents prepared by Valley Gold’s accountants. Plaintiff’s Response: Undisputed. 15 16 DBUDF 4. Plaintiff Estevam has never retained Downey Brand 17 to represent him nor has he ever spoken to, or heard anything 18 said by, a Downey Brand attorney. Plaintiff’s Response: Undisputed. 19 4. 20 21 Plaintiff’s Statement of Undisputed Additional Facts. 22 23 24 25 26 1 In Downey Brand’s statement of undisputed facts in support of its amended motion for summary judgment as to Joseph Lopes as Trustee of the Raymond Lopes Family Trust, Downey Brand asserted the same fact. (Doc. 277-2, DBUDF 1). Plaintiff Joseph Lopes as Trustee of the Raymond Lopes Family Trust responded “undisputed” in his response to Downey Brand’s statement of undisputed facts. (Doc. 282). 11 1 2 3 4 5 PEUDF A. Plaintiff Estevam was a member of CVD until June or July, 2005. PEUDF B. In 2004, CVD began paying late for milk that Plaintiff Estevam delivered to Valley Gold. PEUDF C. Plaintiff Estevam continued to ship milk to Valley 6 Gold because he believed that the Valley Gold cheese plant was 7 going to be successful. 8 9 PEUDF D. Plaintiff Estevam’s friends at the other dairies were also having financial problems, but they continued to ship 10 their milk to Valley Gold. 11 Lopes said that they still believed the cheese plant was going to 12 be successful. 13 to ship their milk to Valley Gold, Plaintiff Estevam did too. 14 PEUDF E. Friends like Raymond Lopes and Manuel Because they believed in the plant and continued When Raymond Lopes and Manuel Lopes quit CVD and 15 stopped shipping their milk to Valley Gold, Plaintiff Estevam 16 quit too. 17 C. 18 The Fourth Cause of Action alleges securities fraud in 19 Fourth Cause of Action. violation of the Securities Exchange Act of 1934.2 20 Defendants move for summary judgment on the ground that 21 Plaintiff Estevam’s admission that he did not purchase any Valley 22 Gold security precludes relief as to him on this cause of action. 23 See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 735-736 24 2 25 26 The caption of the Fourth Cause of Action is “Securities Fraud: Securities Act of 1934.” However, the allegations of the Fourth Cause of Action make clear that the cause of action is for violation of the Securities Exchange Act of 1934 and Rule 10b-5. 12 1 2 (1975). Plaintiff Estevam conceded at the hearing that Defendants 3 are entitled to summary adjudication in their favor as to the 4 Fourth Cause of Action. 5 6 Defendants’ motion for summary judgment against Plaintiff Estevam as to the Fourth Cause of Action is GRANTED. 7 D. 8 The Fifth Cause of Action alleges a claim for violation of 9 10 Fifth Cause of Action. California Corporations Code § 25400(d). Defendants move for summary judgment as to this claim in the 11 Fifth Cause of Action on the ground that Plaintiff Estevam’s 12 admission that he did not purchase any Valley Gold security 13 precludes relief as to him on this state securities cause of 14 action. 15 See Kamen v. Lindly, 94 Cal.App.4th 197, 206 (2001). Plaintiffs does not respond to this ground for summary 16 judgment against Plaintiff Estevam. Because of Plaintiffs’ 17 concession that Defendants are entitled to summary judgment as to 18 the federal securities Fourth Cause of Action, Defendants’ 19 motions for summary judgment against Plaintiff Estevam is GRANTED 20 as to the Fifth Cause of Action. 21 E. Sixth Cause of Action. 22 The Sixth Cause of Action is for negligence. “The elements 23 of a cause of action for negligence are (1) a legal duty to use 24 reasonable care, (2) the breach of that duty, and (3) proximate 25 [or legal] cause between the breach and (4) the plaintiff’s 26 injury.” Mendoza v. City of Los Angeles, 66 Cal.App.4th 1333, 13 1 1339 (1998). 2 care in a particular factual situation is a question of law for 3 the court to decide.” 4 118 Cal.App.4th 269, 278 (2004). 1. 5 6 “The existence of a legal duty to use reasonable Vasquez v. Residential Investments, Inc., GENSKE MULDER. Genske Mulder moves for summary judgment on the ground that 7 Plaintiff Estevam cannot establish that Genske Mulder owed 8 Plaintiff Estevam a duty of care. In Bily v. Arthur Young & Co., 3 Cal.4th 370 (1992), the 9 10 California Supreme Court held that an accounting firm can be held 11 liable for general professional negligence in conducting an audit 12 of financial statements only to the person or entity contracting 13 for the accountant’s services, and, in that case, the accounting 14 firm’s sole client was the company.3 [W]e hold that an auditor’s liability for general negligence in the conduct of an audit of its client financial statements is confined to the client, i.e., the person who contracts for or engages the audit services. Other persons may not recover on a pure negligence theory. 15 16 17 18 19 The Supreme Court stated: 3 Cal.4th at 406. The Supreme Court noted, however: In theory, there is an additional class of persons who may be the practical and legal equivalent of ‘clients.’ It is possible the audit engagement contract might expressly identify a particular third party or parties so as to make them express third party beneficiaries of the contract. Third party 20 21 22 23 24 3 25 26 The California Supreme Court further held that an accountant may be held liable for negligent misrepresentation to third parties who are known to the accountant and for whose benefit the audit report was rendered. 14 1 2 3 4 5 6 beneficiaries may under appropriate circumstances possess the rights of parties to the contract ... This case presents no third party beneficiary issue. Arthur Young was engaged by the company to provide audit reporting to the company. No third party is identified in the engagement contract. Therefore, we have no occasion to decide whether and under what circumstances express third party beneficiaries of audit engagement contracts may recover as ‘clients’ under our holding. 7 Id. at 406 n.16. 8 Because it is undisputed that Plaintiff Estevam never 9 retained Genske Mulder as his accountant or obtained professional 10 services from Genske Mulder and, Genske Mulder asserts, there is 11 no evidence that Genske Mulder is legally responsible for CVD’s 12 failure to pay Plaintiff Estevam for his milk, Genske Mulder 13 contends that it is entitled to summary judgment as to the Sixth 14 Cause of Action. 15 Plaintiff Estevam responds that the fact he was not a client 16 of Genske Mulder does not compel summary judgment in favor of 17 Genske Mulder: “The law is not, and never has been, that rigid.” 18 Plaintiff Estevam cites no case authority for this 19 proposition. However, in Plaintiffs’ opposition to the motion to 20 dismiss the First Amended Complaint, Plaintiff Estevam cited 21 Murphy v. BDO Seidman, LLP, 113 Cal.App.4th 687 (2003), as 22 authority that liability for negligence does not depend on a 23 contractual or professional relationship. 24 In Murphy, scores of stockholders filed an amended complaint 25 alleging negligent and intentional misrepresentation against two 26 15 1 accounting firms for issuing financial statements overstating the 2 value of two corporations in the process of merging upon which 3 the stockholders relied in approving the merger, buying stock in 4 one or both of the corporations. 5 corporation went bankrupt causing the stockholders to lose their 6 investments. 7 demurrers without leave to amend. 8 firms argued that their liability for the inaccuracies in their 9 financial statements was only to their clients, the two Following the merger, the The trial court sustained the accounting firms’ On appeal, the accounting 10 corporations, and therefore no duty of care was owed to third 11 parties. 12 13 14 15 16 17 18 19 20 21 22 The Court of Appeal disagreed: Bily imposes on respondents a duty of care to more than just their clients. Respondents owed a duty to anyone whom they (1) should have reasonably foreseen would rely on their intentional misrepresentations, or (2) knew with substantial certainty would rely on their negligent misrepresentations. (Bily, supra, 3 Cal.4th at pp.413-415.) The complaint alleges respondents knew the proposed merger of WIN and Struthers would induce investors in Struthers to rely on financial statements about WIN in anticipation of the two companies becoming one. In addition, the complaint alleges respondents knew Struthers investors would rely on WIN’s financial statements in deciding whether to approve the merger itself. The complaint therefore alleges a duty from respondents to Struthers’ shareholders, making respondents liable to those shareholders for their misrepresentation. 23 Plaintiff Estevam also cited Cabanas v. Gloodt Associates, 24 942 F.Supp. 1295, 1308-1309 (E.D.Cal.1996), aff’d, 141 F.3d 1174 25 (9th Cir.1998), in their opposition to the motion to dismiss the 26 16 1 First Amended Complaint. At issue in Cabanas was whether an 2 appraiser, when conducting an appraisal of a going concern, owes 3 a duty to the manager or owner of the property not to negligently 4 harm its interests. 5 rule against recovery for negligent interference with contract or 6 prospective economic advantage is subject to one exception: where 7 there is a ‘special relationship’ between the parties.” 8 1308. The District Court noted that the “general Id. at The District Court stated: Whether such a special relationship exists is determined by examining six factors: 9 10 (1) the extent to which the transaction was intended to affect the plaintiff; 11 12 (2) the foreseeability of harm to the plaintiff; 13 (3) the degree of certainty that the plaintiff suffered injury; 14 15 (4) the closeness of the connection between the defendant’s conduct and the injury suffered; 16 17 (5) the moral blame attached to the defendant’s conduct; and 18 (6) the policy of preventing future harm. 19 20 Id. 21 Here, there is no evidence that Plaintiff Estevam relied on 22 any representations made by Genske Mulder; rather, the evidence 23 is that Plaintiff Estevam relied on the opinions of his friends, 24 such as Plaintiffs Raymond Lopes and Manuel Lopes, that the 25 cheese plant was going to be successful, in continuing to ship 26 17 1 milk to CVD for Valley Gold. 2 basis of his friends’ opinions or what they told Plaintiff 3 Estevam. 4 foresaw that Valley Gold investors would provide opinions to 5 their friends who were also milk suppliers to CVD. 6 There is no evidence as to the Nor is there evidence the accountants had notice or Plaintiff Estevam cites Lovejoy v. AT&T Corp., 92 7 Cal.App.4th 85 (2001), which addresses the concepts of indirect 8 misrepresentation and indirect reliance: 9 10 11 12 13 It is true that California courts recognize the principle of indirect misrepresentation, under which a knowingly false statement is no less actionable because it was made to an intermediary who then conveyed it to the party ultimately injured ... However, this doctrine requires that the defendant intend or has reason to expect that it will be ‘repeated and acted upon by the plaintiff.’ ... 14 15 16 17 18 19 20 ... Under the principle of indirect reliance, a fraudulent misrepresentation is actionable if it was communicated to an agent of the plaintiff and was acted upon by the agent to the plaintiff’s damage. A classic example of indirect reliance would be a drug manufacturer’s misrepresentation to physicians about the safety of its drug. A patient injured by the drug is permitted to sue the manufacturer for fraud without proof that his doctor repeated the falsehood to him, under the theory that the doctor was acting as the plaintiff’s agent. 21 92 Cal.App.4th at 94. Plaintiff Estevam argues that Genske 22 Mulder may be liable under the theory of indirect 23 misrepresentation and indirect reliance. However, Plaintiff 24 Estevam presents no evidence that Genske Mulder intended or had 25 reason to expect that any misrepresentation concerning Valley 26 18 1 Gold would be repeated and acted upon by a person who did not 2 invest in Valley Gold and presents no evidence that Plaintiff 3 Estevam’s friends such as Manuel Lopes was acting as Plaintiff 4 Estevam’s agent. 5 Plaintiff Estevam asserts that Genske Mulder is subject to 6 negligence liability under the derivative claim asserted on 7 behalf of Valley Gold. 8 9 Plaintiff Estevam concedes that he did not purchase a Valley Gold security, i.e., that he was not a shareholder of Valley 10 Gold. 11 behalf of the corporation. 12 800(b); Rule 23.1, Federal Rules of Civil Procedure. 13 he cannot base his claim of negligence against Genske Mulder on 14 derivative liability. 15 16 17 18 19 20 21 22 23 24 25 26 A derivative action must be brought by the shareholders on See California Corporations Code § Therefore, Plaintiff Estevam further argues that the “whole range of facts is much more damaging” than Genske Mulder will admit: As the cheese plant faltered and lost money in the first six months, Paul Anema from Genske Mulder prepared a chart for a planned meeting showing that Valley Gold was selling its cheese at about half the established market rate. Mr. Vieira objected, and Mr. Anema complied, and he hid the chart from the light of day. Genske Mulder every month reconciled CVDs [sic] accounts and processed its bills, and saw every month the bills for Mr. Vieira’s criminal attorneys. Those bills leave no doubt that Mr. Vieira was actively negotiating a plea deal, was planning on going to prison, and was guilty of securities fraud in the operation of a cheese plant in Manteca, California. (See Plaintiffs’ Exhibits N through V.). None of these representations were made by Genske Mulder to 19 1 Plaintiff Estevam. The evidence is undisputed that Plaintiff 2 Estevam never received or read the Valley Gold Offering 3 Memorandum, that he did not receive any documents from Genske 4 Mulder and did not receive any representations from Genske 5 Mulder. 6 Genske Mulder’s motion for summary judgment against 7 Plaintiff Estevam as to the Sixth Cause of Action is GRANTED. 2. 8 Downey Brand. 9 Downey Brand moves for summary judgment as to the Sixth 10 Cause of Action on the grounds that Plaintiff Estevam cannot 11 establish an affirmative misrepresentation made by Downey Brand 12 to Plaintiff Estevam and that Downey Brand owed no duty to 13 disclose to Plaintiff Estevam. 14 Downey Brand asserts that Plaintiff Estevam cannot point to 15 an affirmative misstatement made by Downey Brand to Plaintiff 16 Estevam. 17 Co., 77 F.3d 1215, 1225 (10th Cir.1996), a case addressing a 18 primary liability claim under § 10(b): “Reliance only on 19 representations made by others cannot itself form the basis of 20 liability.” 21 misrepresentation, clearly a representation is an essential 22 element.” 23 Downey Brand quotes Anixter v. Home-Stake Production “[F]or a cause of action for negligent Plaintiff Estevam cites Lovejoy v. AT&T Corp., supra, 92 24 Cal.App.4th at 94, addressing the concepts of indirect 25 misrepresentation and indirect reliance. 26 argues that Downey Brand may be liable under the theory of 20 Plaintiff Estevam 1 indirect misrepresentation and indirect reliance. 2 Plaintiff Estevam presents no evidence that Downey Brand intended 3 or had reason to expect that any misrepresentation concerning 4 Valley Gold would be repeated and acted upon by a person who did 5 not invest in Valley Gold and presents no evidence that Plaintiff 6 Estevam’s friends such as Manuel Lopes were acting as Plaintiff 7 Estevam’s agent. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 However, Downey Brand also moves for summary judgment on the ground that it did not have a duty to disclose running to Plaintiff Estevam. As explained in Fox v. Pollack, 181 Cal.App.3d 954, 960 (1986): With certain exceptions, an attorney has no obligation to a nonclient for the consequences of professional negligence this is, the attorney is not burdened with any duty toward nonclients merely because of his or her status as an attorney. The existence of such a duty is a question of law dependent upon ‘a judicial weighing of the policy considerations for and against the imposition of liability under the circumstances ...’ ... The imposition of a duty of professional care toward nonclients has generally been confined to those situations wherein the nonclient was an intended beneficiary of that attorney’s services, or where it was reasonably foreseeable that negligent service or advice to or on behalf of the client would cause harm to others. ‘[T]he determination whether in a specific case the [attorney] will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of the harm to him, the degree of certainty that the plaintiff suffered 21 1 2 injury, the closeness of the connection between the [attorney’s] conduct and the injury, and the policy of preventing future harm ...’.... 3 Downey Brand notes that Plaintiff Estevam concedes he was 4 not a client of Downey Brand, but pleads that Downey Brand 5 represented CVD and Valley Gold. Downey Brand cites La Jolla 6 Cove Motel and Hotel Apartments, Inc. v. Superior Court, 121 7 Cal.App.4th 773, 784 (2004): 8 11 In representing a corporation, an attorney’s client is the corporate entity, not individual shareholders or directors, and the individual shareholders or directors cannot presume that corporate counsel is protecting their interests. 12 Rule 3-600(E), State Bar Rules of Professional Conduct, provides: 13 18 A member representing an organization may also represent any of its ... members, shareholders, or other constituents, subject to the provisions of rule 3-310. If the organization’s consent to the dual representation is required by rule 3-310, the consent shall be given by an appropriate constituent of the organization other than the individual or constituent who is to be represented, or by the shareholder(s) or organization members. 19 Downey Brand asserts that Plaintiff Estevam concedes there was no 20 agreement by either CVD or Valley Gold that Downey Brand 21 represent Plaintiff Estevam. 9 10 14 15 16 17 22 Downey Brand asserts that it did not represent CVD. 23 Plaintiff responds that Downey Brand did not “exit the scene” 24 after the Offering: 25 26 Rather, on November 4, 2005, Downey Brand accepted a $15,000 retainer paid by CVD which was then owed $30 million in unpaid milk, and 22 it then used that retainer to prepare an agreement to try to cram down the conversions of milk debt for equity, despite the lack of necessary consensus or corporate formalities. 1 2 3 However, the evidence is that Downey Brand was not paid by 4 CVD and that the $15,000 check was returned by Downey Brand to 5 CVD uncashed because Downey Brand’s client was Valley Gold, not 6 CVD. Plaintiff Estevam presents no contrary evidence. 7 Downey Brand further argues that, even if it did represent 8 CVD, a cooperative corporation is distinct from its members, 9 citing Schuler v. Meschke, 435 N.W.2d 156, 162 (Minn.App.1989): 10 An incorporated cooperative is a legal entity, separate and apart from its members. 18 Am.Jur.2d Cooperative Associations, § 3, page 263. North Dakota law governing cooperatives recognizes a distinction between a cooperative and its members ... Minnesota has similar laws. 11 12 13 14 Although Downey Brand represented Valley Gold, no duty to 15 Plaintiff Estevam arises from this fact, Downey Brand contends, 16 because Plaintiff Estevam did not purchase any Valley Gold 17 security. 18 Downey Brand’s motion for summary judgment against Plaintiff 19 Estevam as to the Sixth Cause of Action is GRANTED. 20 F. Seventh Cause of Action. 21 The Seventh Cause of Action is for intentional 22 misrepresentation. “‘The necessary elements of fraud are: (1) 23 misrepresentation (false representation, concealment, or 24 nondisclosure); (2) knowledge of falsity (scienter); (3) intent 25 to defraud (i.e., to induce reliance); (4) justifiable reliance; 26 23 1 and (5) resulting damage.’” Alliance Mortgate Co. v. Rothwell,, 2 10 Cal.4th 1226, 1239 (1995). 3 4 1. Genske Mulder. Genske Mulder argues that Plaintiff Estevam is unable to 5 establish that Genske Mulder made any misrepresentations to 6 Plaintiff Estevam or that he justifiably relied on any false 7 representation, concealment or nondisclosure. 8 notes that it is undisputed that Plaintiff Estevam has never 9 spoken with anyone at Genske Mulder, has never received any Genske Mulder 10 documents from Genske Mulder, is unable to identify any Genske 11 Mulder personnel involved in the CVD/Valley Gold professional 12 relationship, and is unable to state any material 13 misrepresentation or omission made by Genske Mulder. 14 Plaintiff again relies on the doctrine of indirect 15 representation. 16 above, there is not factual or legal basis to support this claim. 17 Genske Mulder’s motion for summary judgment as to the Seventh 18 Cause of Action is GRANTED. 19 2. See discussion supra. For the reasons stated Downey Brand. 20 Downey Brand argues that summary judgment is appropriate as 21 to the Seventh Cause of Action because there is no evidence that 22 Downey Brand made any misrepresentation to the Plaintiff. 23 Plaintiff never read the Valley Gold Offering Memorandum or any 24 other document prepared by Downey Brand. 25 involved in the Milk for Equity transaction. 26 evidence to the contrary is the assertion Plaintiff relied on the 24 The Downey Brand was not Plaintiff’s only 1 opinion of friends, two of whom invested in Valley Gold, in 2 deciding to continue to ship milk to Valley Gold. 3 the reasons stated above, this evidence is insufficient to create 4 a genuine issue of material fact as to the Seventh Cause of 5 Action. 6 Seventh Cause of Action is GRANTED. Downey Brand’s motion for summary judgment as to the 7 G. 8 The Eighth Cause of Action is for negligent 9 However, for Eighth Cause of Action. misrepresentation, the elements of which are (1) a 10 misrepresentation of a past or existing material fact, (2) 11 without reasonable grounds for believing it to be true, (3) with 12 intent to induce another’s reliance on the fact misrepresented, 13 (4) ignorance of the truth and justifiable reliance thereon by 14 the party to whom the misrepresentation was directed, and (5) 15 damages. 16 17 18 Fox v. Pollack, 181 Cal.App.3d 954, 962 (1986). 1. Genske Mulder. Genske Mulder moves for summary judgment on the ground that Genske Mulder made no representations to the Plaintiff. 19 The tort of negligent misrepresentation requires a positive 20 assertion; an implied assertion or misrepresentation by omission 21 is not enough. 22 Cal.App.4th 288, 297-298 (1997). 23 Cal.App.3d 926, 942 (1990), the Court of Appeals held that a 24 financial advisor’s failure to disclose material facts concerning 25 a land investment did not constitute negligent misrepresentation. 26 Because Genske Mulder made no representations Plaintiff Diediker v. Peelle Financial Corp., 60 25 In Byrum v. Brand, 219 1 Estevam, Genske Mulder’s motion for summary judgment as to the 2 Eighth Cause of Action is GRANTED. 2. 3 Downey Brand. Downey Brand moves for summary judgment as to the Eighth 4 5 Cause of Action on the ground that Downey Brand made no 6 representations to Plaintiff Estevam. Plaintiff never read the Valley Gold Offering Memorandum or 7 8 any other document prepared by Downey Brand. Downey Brand was 9 not involved in the Milk for Equity transaction. Plaintiff’s 10 only evidence to the contrary is the assertion that Plaintiff 11 relied on the opinion of friends, two of whom invested in Valley 12 Gold in deciding to continue to ship milk to Valley Gold. 13 However, for the reasons stated above, this evidence is 14 insufficient to create a genuine issue of material fact as to the 15 Eighth Cause of Action. 16 judgment as to the Eighth Cause of Action is GRANTED. Downey Brand’s motion for summary CONCLUSION 17 18 For the reasons stated: 19 1. Downey Brand and Genske Mulder’s motions for summary 20 judgment against Plaintiff Antonio Estevam on the Fourth through 21 Eighth Causes of Action in the Second Amended Complaint (“SAC”) 22 are GRANTED; 23 2. Counsel for Defendants shall prepare and lodge a form of 24 order consistent with this Memorandum Decision within five (5) 25 court days following service of this Memorandum Decision. 26 /// 26 1 IT IS SO ORDERED. 2 Dated: 668554 September 27, 2010 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
