Maksoud v. Hopkins et al, No. 3:2017cv00362 - Document 135 (S.D. Cal. 2018)
Court Description: ORDER Granting in Part and Denying in Part 99 Defendant Philippe Guelton's Motion for Summary Judgment. the Court denies in part and grants in part Defendant Guelton's motion for summary judgment. Specifically, the Court denies Defendant Guelton's motion for summary judgment as to Plaintiff's claims for: intentional misrepresentation, aiding and abetting fraud, false promise, unjust enrichment, restitution, constructive trust, breach of fiduciary duties, negligence, unfair business practices, and accounting. The Court grants Defendant Guelton's motion for summary judgment as to Plaintiff's claims for: common count (money had and received), intentional interference with prospective economic relations, negligent interference with prospective economic relations, and declaratory judgment. Signed by Judge Marilyn L. Huff on 11/13/2018. (acc)
Download PDF
<![CDATA[
Maksoud v. Hopkins et al Doc. 135 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 11 12 13 14 DR. CHARBEL MAKSOUD, Case No.: 17-cv-00362-H-WVG Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT PHILIPPE GUELTON’S MOTION FOR SUMMARY JUDGMENT v. BRUCE HOPKINS, et al., Defendants. 15 [Doc. No. 99] 16 17 On August 17, 2018, Defendant Philippe Guelton (“Defendant Guelton”) filed a 18 motion for summary judgment or, in the alternative, partial summary judgment. (Doc. 19 No. 99.) Plaintiff Dr. Charbel Maksoud (“Plaintiff”) opposed the motion on September 4, 20 2018. (Doc. No. 107.) Defendant Guelton replied on September 10, 2018. (Doc. No. 116.) 21 On September 14, 2018, the Court continued the hearing on the motion for summary 22 judgment and set a supplemental briefing schedule in order for the parties to incorporate 23 pending depositions. (Doc. No. 122.) On October 12, 2018, Defendant Guelton filed a 24 supplemental brief in support of his motion for summary judgment. (Doc. No. 124.) On 25 October 26, 2018, Plaintiff filed a supplemental opposition. (Doc. No. 126.) On November 26 2, 2018, Defendant Guelton filed a supplemental reply. (Doc. No. 131.) The Court held a 27 hearing on the matter on November 9, 2018. Mark Y. Lazo appeared for Plaintiff, Charles 28 D. Ferrari appeared for Defendant Guelton, and Christopher L. Walters appeared 1 17-cv-00362-H-WVG Dockets.Justia.com 1 telephonically for Defendant Tirrell Payton. Following the hearing, the Court again 2 reviewed the entire record. For the reasons below, the Court grants in part and denies in 3 part Defendant Guelton’s motion for summary judgment. 4 5 BACKGROUND I. Factual History 6 This action presents a stockholder dispute in which Plaintiff alleges that Defendant 7 Guelton and others mislead him into investing in a now-failed start-up. (Doc. No. 35.) 8 Beginning in July 2011, Plaintiff befriended his neighbor, Bruce Hopkins (“Hopkins”). 9 (Doc. 107-9, Maksoud Decl. ¶ 2.) Plaintiff learned that Hopkins and Defendant Tirrell 10 Payton (“Payton”) were starting a company, BT Software and Research, Inc. (“BT”). (Id.) 11 Hopkins told Plaintiff that BT was working with Defendant Guelton, a “hugely successful 12 online and media marketing businessman[.]” (Id. ¶ 3.) 13 In Spring of 2012, Hopkins began inviting Plaintiff to invest in BT. (Id.) Plaintiff 14 states under oath that during this time, he engaged in numerous phone calls with Hopkins, 15 Payton, and Defendant Guelton in which each of them stated that BT had experienced 16 tremendous growth, secured contracts with major automobile manufacturers, and secured 17 funding from other investors. (Id. ¶ 4, 6, 7; Doc. No. 132-1, Maksoud Depo. at 273–79, 18 302–04.) Plaintiff also testifies that during such phone calls, Defendant Guelton “boasted 19 about his national and international contacts in the online and mass-media marketing areas 20 and related that he had set up numerous meetings in New York with identified strategic 21 partners” and stated that Plaintiff would “substantially benefit as long as [his] investment 22 was made quickly.” (Maksoud Decl. ¶ 6, 8; Doc. No. 132-1, Maksoud Depo. at 309–10.) 23 Maksoud specifically states that Defendant Guelton told him that BT had secured contracts 24 with media companies, including Hearst and the New York Times. (Maksoud Decl. ¶ 4; 25 Doc. No. 132-1, Maksoud Depo. at 211, 310–11, 382.) 26 Beginning in November 2011, Defendant Guelton was an advisor to BT. (Doc. No. 27 99-2, Guelton Decl. ¶ 2.) Under his Advisor Agreement with BT, Defendant Guelton’s 28 duties included: “(i) meeting periodically with the Company’s key management for 2 17-cv-00362-H-WVG 1 strategy and goal setting sessions; (ii) introducing the Company to prospective strategic 2 partners (including talent and retailers); (iii) being reasonably available to the Company by 3 telephone and e-mail; (iv) lending Advisor’s name when and where appropriate; and (v) 4 attending meetings with prospective and/or existing strategic partners[.]” (Doc. No. 99-4, 5 Exh. A at 2.) In July 2013, Defendant Guelton joined BT’s Board of Directors, but retained 6 the same duties he had as an advisor. (Guelton Decl. ¶ 5–6; Doc. No. 99-6, Exh. C at 2.) 7 According to his agreements with BT, for both his roles as advisor and director, Defendant 8 Guelton was to be compensated with shares of BT, not by salary. (Doc. Nos. 99-4, Exh. A 9 at 2; 99-6, Exh. C at 2; 124-4, Payton Depo. at 8–9.) However, Defendant Guelton states 10 that he never received any documentation of his shares in BT. (Guelton Decl. ¶ 22.) 11 Defendant Guelton has submitted a declaration under oath stating that he had no 12 communications with Plaintiff prior to Plaintiff’s investment in BT, and that he did not 13 make any representations to Plaintiff regarding BT, his industry knowledge, or his media 14 contacts. (Id. ¶ 8.) Defendant Guelton states that he first learned of Plaintiff’s investment 15 from Hopkins via email on May 1, 2014, and that he had no other communications with 16 any party regarding Plaintiff’s investment. (Id. ¶ 7; Doc. No. 99-7, Exh. D.) 17 On May 10, 2014, Plaintiff invested $250,000 in BT to develop a media platform 18 called “Kaliki.” (Doc. No. 99-18, Exh. O; Maksoud Depo. at 327–28.) Plaintiff signed an 19 Advisor Agreement with duties identical to those listed in Defendant Guelton’s Advisor 20 Agreement. (Doc. No. 99-22, Exh. S.) Plaintiff states that Defendant Guelton, Hopkins, 21 and Payton all represented to him that his investment would be used for operational 22 expenses, research, and development, not for salaries. (Doc. No. 132-1, Maksoud Depo. at 23 282–83.) 24 Defendant Guelton states that he was first introduced to Plaintiff in a May 14, 2014 25 email from Hopkins. (Guelton Decl. ¶ 10; Doc. No. 99-9, Exh. F.) Defendant Guelton states 26 that the first time he spoke to Plaintiff via telephone was June 3, 2014. (Guelton Decl. ¶ 11.) 27 Defendant Guelton states that Plaintiff expressed a desire to help expand BT into France, 28 so Defendant Guelton provided Plaintiff with information of French media contacts. (Id.) 3 17-cv-00362-H-WVG 1 Defendant Guelton maintains that his interaction with Plaintiff was very limited. (Id.) In 2 contrast, Plaintiff states that after he invested, he periodically communicated with Hopkins 3 and Defendant Guelton regarding BT’s procurement of new strategic partners and outside 4 investors. (Maksoud Decl. ¶ 12.) Plaintiff further states that after investing in BT, he 5 recruited his now-deceased brother-in-law, Nadeem Baaklini, to develop a software search 6 engage for BT called “OnSay” in exchange for equity in BT. (Doc. No. 35 at 6; Doc. No. 7 132-1, Maksoud Depo. at 76–77, 184.) 8 Beginning in November 2015, Plaintiff, Defendant Guelton, and Payton were all 9 unable to contact Hopkins. (Guelton Decl. ¶ 12–18.) In December 2015 and January 2016, 10 through email communications, the parties learned that Hopkins initiated a wire transfer 11 from BT’s business account and was involved in legal trouble in Spain related to the death 12 of Hopkins’s son. (Id. at ¶ 19; Doc. Nos. 99-24–99-27, Exhs. U–X.) At some point after 13 that BT was forfeited. (Guelton Decl. ¶ 20.) Defendant Guelton states that he was not 14 involved in the forfeiture and does not hold any intellectual property rights relating to BT. 15 (Id. ¶ 20–21.) 16 After hearing nothing regarding his investment for several months, Plaintiff hired 17 counsel to investigate the veracity of the representations made by Defendant Guelton, 18 Hopkins, and Payton before and after Plaintiff’s investment. (Maksoud Decl. at ¶ 13.) 19 Plaintiff states that this investigation shows that there were no other investors, no contracts 20 with major automobile companies, and no relationships with media companies. (Id.) 21 Plaintiff maintains that had Defendant Guelton not made the allegedly false statements and 22 representations to him prior to his investment, he would not have invested in BT. (Id. at ¶ 23 14.) Defendant Guelton denies that any conversations with Plaintiff occurred prior to his 24 investment and produces phone records showing that he did not call Plaintiff before the 25 investment. (Guelton Decl. ¶ 8; Doc. No. 124-2, Exh. DD.) In contrast, Plaintiff states that 26 he had multiple telephone calls with Defendant Guelton regarding BT. (Maksoud Decl. ¶ 4, 27 6, 8.) 28 /// 4 17-cv-00362-H-WVG 1 II. Procedural History 2 On July 10, 2017, Plaintiff filed his Second Amended Complaint alleging several 3 causes of action against: Defendant Guelton; Tirrell and Susan Payton; Shawn Smith; BT; 4 SheKnows Media; and Momentum Marketing. (Doc. No. 35.) Since then, all defendants 5 have been dismissed except Defendant Guelton, Tirrell Payton, and Susan Payton.1 (Doc. 6 Nos. 56, 57, 83.) Plaintiff alleges 14 causes of action against Defendant Guelton: 7 (1) intentional misrepresentation, (2) unjust enrichment, (3) restitution, (4) breach of 8 fiduciary duties of care and loyalty, (5) common count (money had and received), (6) 9 intentional interference with prospective economic relations, (7) unfair business practices, 10 (8) negligent interference with prospective economic relations, (9) negligence, (10) 11 constructive trust, (11) aiding and abetting fraud, (12) false promise, (13) accounting, and 12 (14) declaratory relief. 2 (Doc. No. 35.) 13 14 DISCUSSION I. Legal Standards 15 Summary judgment is appropriate under Federal Rule of Civil Procedure 56 if the 16 moving party demonstrates that there is no genuine issue of material fact and that it is 17 entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 18 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could 19 affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); 20 Fortune Dynamic, Inc. v. Victoria’s Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1031 21 (9th Cir. 2010). “A genuine issue of material fact exists when the evidence is such that a 22 reasonable jury could return a verdict for the nonmoving party.” Fortune Dynamic, 618 23 24 25 26 27 28 1 BT was listed as a Defendant in the Second Amended Complaint and has not been dismissed, however Plaintiff never filed proof of service as to BT, BT has not made an appearance, and Plaintiff has not asked the Court for an extension of time to serve BT. Accordingly, the Court considers Plaintiff’s failure to serve BT within the time limits set forth in Federal Rule of Civil Procedure 4(m) and Civil Local Rule 4.1 to mean that Plaintiff is not proceeding against BT. 2 Plaintiff’s causes of action for breach of implied covenant of good faith and fair dealing (Claim 4) and breach of written contract (Claim 13) are only made against BT. (Doc. No. 35 at 10, 22.) 5 17-cv-00362-H-WVG 1 F.3d at 1031 (internal quotation marks and citations omitted); accord Anderson, 477 U.S. 2 at 248. “Disputes over irrelevant or unnecessary facts will not preclude a grant of summary 3 judgment.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th 4 Cir. 1987). 5 A party seeking summary judgment always bears the initial burden of establishing 6 the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party 7 can satisfy this burden in two ways: (1) by presenting evidence that negates an essential 8 element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party 9 failed to establish an essential element of the nonmoving party’s case that the nonmoving 10 party bears the burden of proving at trial. Id. at 322–23; Jones v. Williams, 791 F.3d 1023, 11 1030 (9th Cir. 2015). Once the moving party establishes the absence of a genuine issue of 12 material fact, the burden shifts to the nonmoving party to “set forth, by affidavit or as 13 otherwise provided in Rule 56, ‘specific facts showing that there is a genuine issue for 14 trial.’” T.W. Elec. Serv., 809 F.2d at 630 (quoting former Fed. R. Civ. P. 56(e)); accord 15 Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007). To carry this 16 burden, the non-moving party “may not rest upon mere allegation or denials of his 17 pleadings.” Anderson, 477 U.S. at 256; see also Behrens v. Pelletier, 516 U.S. 299, 309 18 (1996) (“On summary judgment, . . . the plaintiff can no longer rest on the pleadings.”). 19 Rather, the nonmoving party “must present affirmative evidence . . . from which a jury 20 might return a verdict in his favor.” Anderson, 477 U.S. at 256. Questions of law are well- 21 suited to disposition via summary judgment. See, e.g., Pulte Home Corp. v. Am. Safety 22 Indem. Co., 264 F. Supp. 3d 1073, 1077 (S.D. Cal. 2017). 23 When ruling on a summary judgment motion, the Court must view the facts and 24 draw all reasonable inferences in the light most favorable to the non-moving party. Scott 25 v. Harris, 550 U.S. 372, 378 (2007). A court should not weigh the evidence or make 26 credibility determinations. See Anderson, 477 U.S. at 255. Further, the Court may consider 27 other materials in the record not cited to by the parties, but it is not required to do so. See 28 Fed. R. Civ. P. 56(c)(3); Simmons v. Navajo Cnty., 609 F.3d 1011, 1017 (9th Cir. 2010). 6 17-cv-00362-H-WVG 1 II. Analysis 2 Defendant Guelton seeks summary judgment on all 14 causes of action made against 3 him in Plaintiff’s Second Amended Complaint. (Doc. No. 99.) Defendant Guelton argues 4 that: (1) he did not make and had no knowledge of any alleged misrepresentations; (2) he 5 had no authority to and did in fact not participate in, direct, or authorize any wrongdoing 6 by BT; (3) he had no knowledge of any of Plaintiff’s prospective economic relations; (4) 7 he did not receive or profit from any portion of Plaintiff’s investment; (5) an accounting is 8 unnecessary when a sum can be readily determined and he lacked access to BT’s 9 accounting records; and (6) declaratory relief is improper. (Id. at 11–27.) Defendant 10 Guelton also argues that Plaintiff has failed to create genuine issues of material fact because 11 he only relies on uncorroborated, self-serving testimony. (Doc. No. 124 at 5.) 12 In opposition, Plaintiff argues that there are triable issues of fact with regards to his 13 claims against Defendant Guelton. (Doc. No. 126 at 3.) Plaintiff states that he and 14 Defendant Guelton did speak prior to his investing in BT, and during such conversations 15 Defendant Guelton made misrepresentations in order to induce Plaintiff’s investing. (Id.) 16 Plaintiff also argues that Defendant Guelton as a director owed Plaintiff fiduciary duties, 17 and whether those duties were breached is a factual inquiry. (Id. at 6–7.) 18 The Court concludes that, drawing all inferences in favor of Plaintiff, Scott, 550 19 U.S. at 378, triable issues of fact remain on Plaintiff’s claims for: intentional 20 misrepresentation, aiding and abetting fraud, false promise, unjust enrichment, restitution, 21 constructive trust, breach of fiduciary duties, negligence, unfair business practices, and 22 accounting. Thus, the Court denies summary judgment on those claims. However, the 23 Court grants summary judgment on the claims for common count (money had and 24 received), intentional and negligent interference with prospective economic relations, and 25 declaratory judgment. 26 27 28 A. Intentional Misrepresentation (Claim 1), Aiding and Abetting Fraud (Claim 12), and False Promise (Claim 14) Plaintiff’s claims for intentional misrepresentation, aiding and abetting fraud, and 7 17-cv-00362-H-WVG 1 false promise all arise out of alleged misrepresentations made by Defendant Guelton in 2 order to induce Plaintiff’s investment. (Doc. No. 126 at 3.) In a claim for intentional 3 misrepresentation, the plaintiff must show: “(1) a misrepresentation; (2) knowledge of 4 falsity; (3) intent to induce reliance; (4) actual and justifiable reliance, and (5) resulting 5 damages.” Cisco Systems, Inc. v. STMicroelectronics, Inc., 77 F. Supp. 3d 887, 897 (N.D. 6 Cal. 2014). Plaintiff must specifically indicate the “time, place, and specific content of the 7 false representations as well as the identities of the parties to the misrepresentation.” Swartz 8 v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). 9 In a claim for aiding and abetting an intentional tort, “plaintiffs must prove: (1) the 10 fact of perpetration of the overall improper scheme; (2) the aider and abettor’s knowledge 11 of such a scheme; and (3) the aider and abettor’s substantial assistance furthered the 12 scheme.” River Colony Estates Gen. P’ship v. Bayview Fin. Trading Grp., Inc., 287 F. 13 Supp. 2d 1213, 1225 (S.D. Cal. 2003) (citing Harmsen v. Smith, 693 F.2d 932, 943 (9th 14 Cir. 1982)); see Casey v. U.S. Bank Nat. Assn., 127 Cal. App. 4th 1138, 1144 (2005). 15 “Mere knowledge that a tort is being committed and the failure to prevent it does not 16 constitute aiding and abetting.” Austin B. v. Escondido Union Sch. Dist., 149 Cal. App. 17 4th 860, 879 (2007) (citing Fiol v. Doellstedt, 50 Cal. App. 4th 1318, 1326 (1996)). 18 False promise is a particular type of fraud. See Beckwith v. Dahl, 205 Cal. App. 4th 19 1039, 1060 (2012) (referring to the action as “deceit by false promise” or “fraudulent 20 deceit”); Bernstein v. Vocus, Inc., 2014 WL 3673307, *5 (N.D. Cal. July 23, 2014) 21 referring to the action as “a false promise fraud theory”). In an action for false promise, 22 “one must specifically allege and prove . . . that the promisor did not intend to perform at 23 the time he or she made the promise and that it was intended to deceive or induce the 24 promise to do or not do a particular thing.” Tarmann v. State Farm Mut. Auto. Ins. Co., 25 2 Cal. App. 4th 153, 158 (1991). 26 On all three of these claims, genuine issues of material fact remain. Defendant 27 Guelton maintains that he never personally spoke to Plaintiff prior to Plaintiff’s investing. 28 (Doc. No. 99 at 13–14; Guelton Decl. ¶ 8.) To show that the he and Plaintiff never spoke 8 17-cv-00362-H-WVG 1 on the phone, Defendant Guelton provides his call logs for the dates on which Plaintiff 2 states that he spoke with Defendant Guelton. (Doc. No. 124-2, Exh. DD.) He also cites to 3 deposition testimony of Payton in which Payton states that no such conversations occurred 4 prior to Plaintiff’s investment. (Doc. No. 124-4, Payton Depo. at 11–12.) Defendant 5 Guelton argues that Plaintiff has not created genuine issues of fact because the only 6 evidence that Plaintiff has produced showing that such conversations took place are 7 Plaintiff’s declaration and deposition, which are uncorroborated and self-serving. (Doc. 8 No. 124 at 3.) Further, Defendant Guelton argues that Plaintiff’s deposition testimony is 9 contradictory to Plaintiff’s responses to Defendant Guelton’s requests for admissions. 10 (Doc. No. 131 at 4.) There, when asked to admit that Plaintiff did not seek to speak with 11 or otherwise communicate with Defendant Guelton prior to his investing in BT, Plaintiff 12 stated: “Deny, except to the extent that Plaintiff did not meet face to face with [Defendant 13 Guelton] prior to the investment but rather relied upon authorized representations of [his] 14 involvement and role in BT.” (Doc. No. 99-19 at 10.) 15 The Ninth Circuit has “refused to find a ‘genuine issue’ [as to a material fact] where 16 the only evidence presented is ‘uncorroborated and self-serving’ testimony.” Manley v. 17 Rowley, 847 F.3d 705, 710–11 (9th Cir. 2017) (quoting Villiarimo v. Aloha Island Air, 18 Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quotation marks omitted and alterations in 19 original). But, “because a party’s own testimony will nearly always be ‘self-serving,’ the 20 mere self-serving nature of testimony permits a court to discount that testimony where it 21 ‘states only conclusions and not facts that would be admissible evidence.’” Id. (quoting 22 Nigro v. Sears, Roebuck and Co., 784 F.3d 495, 497–98 (9th Cir. 2015)). Further, “a court 23 ruling on a motion for summary judgment may not engage in ‘[c]redibility determinations’ 24 or ‘the weighing of evidence,’ as those are functions reserved for the jury.” Id. (quoting 25 Anderson, 477 U.S. at 255) (alterations in original). 26 Plaintiff’s evidence creates genuine issues of material fact. Plaintiff declares under 27 oath that he spoke to Defendant Guelton numerous times before he invested in BT. 28 (Maksoud Decl. ¶ 4; Doc. No. 132-1, Maksoud Depo. at 279, 302–04.) Plaintiff states that 9 17-cv-00362-H-WVG 1 during these conversations, Defendant Guelton, Payton, and Hopkins stated that BT had 2 secured major contracts and meetings with automobile manufacturers and media 3 companies. (Maksoud Decl. ¶ 4–5; Doc. No. 132-1, Maksoud Depo. at 228, 309–10, 382.) 4 Plaintiff maintains that these statements induced him to invest in BT. (Maksoud Decl. ¶ 5 11.) Plaintiff declares that ultimately he found through an investigation that the statements 6 were false. (Id. at 13; Doc. No. 132-1, Maksoud Depo. at 309–11.) Further, Plaintiff’s 7 responses to requests for admissions are not directly contradictory to his declaration and 8 deposition testimony. In his response to requests for admissions, Plaintiff denies that the 9 two never spoke prior to his investment, only stating that the two never met face to face. 10 (Doc. No. 99-19 at 10.) 11 Defendant Guelton argues that Plaintiff’s declaration and deposition testimony are 12 different from Plaintiff’s discovery responses, but Defendant Guelton has not specifically 13 shown the Court where. It is clear that no face-to-face communications between Defendant 14 Guelton and Plaintiff took place prior to Plaintiff’s investment. However, the two provide 15 dramatically different accounts of conversations that lead to Plaintiff’s investment. For 16 example, Plaintiff states that the calls were not initiated through his own phone, but rather, 17 he spoke with Defendant Guelton on conference calls, through Hopkins’s phone and 18 through alternative call methods, like Skype and Hangout. (Doc. No. 132-1, Maksoud 19 Depo. at 273–82, 313–14.) The Court should not weigh the evidence or make credibility 20 determinations. See Anderson, 477 U.S. at 255. For that reason, the Court denies summary 21 judgment as to Plaintiff’s claims for intentional misrepresentation, aiding and abetting 22 fraud, and false promise. 23 24 B. Unjust Enrichment (Claim 2), Restitution (Claim 3), and Constructive Trust (Claim 11) 25 Plaintiff’s claims for unjust enrichment, restitution, and constructive trust are all 26 remedies for Guelton’s allegedly fraudulent conduct and misuse of Plaintiff’s investment. 27 (Doc. No. 126 at 8–9.) “The elements of an unjust enrichment claim are ‘the receipt of a 28 benefit and [the] unjust retention of the benefit at the expense of another.’” Peterson v. 10 17-cv-00362-H-WVG 1 Cellco P’ship, 164 Cal. App. 4th 1583, 1593 (2008). “A person who has been unjustly 2 enriched at the expense of another is required to make restitution to the other. A person is 3 enriched if he receives a benefit at another’s expense.” Troyk v. Farmers Grp., Inc., 171 4 Cal. App. 4th 1305, 1339 (2009) (quoting County of Solano v. Vallejo Redevelopment 5 Agency, 75 Cal. App. 4th 1262 (1999)). Thus the elements of a restitution claim are 6 identical to those of an unjust enrichment claim. See Bowler v. Home Depot USA Inc., 7 2010 WL 3619850, *4 (N.D. Cal. Sept. 13, 2010) (“Restitution is defined by the element 8 of “unjust enrichment”). 9 “[T]hree conditions are necessary for a plaintiff to establish a constructive trust for 10 its benefit: the existence of a res (some property or some interest in property), the plaintiff’s 11 right to that rest, and the defendant’s gain of the res by fraud, accident, mistake, undue 12 influence or other wrongful act.” United States v. Pegg, 782 F.2d 1498, 1500 (9th Cir. 13 1986). “Under California law, a constructive trust is an equitable remedy, not a substantive 14 claim. In order to establish a constructive trust, the purported beneficiary of the trust must 15 have a substantive right to receive the property.” Fourth Investment LP v. United States, 16 2010 WL 3069685, *8 (S.D. Cal. Aug. 4, 2010) (citing Pegg, 782 F.2d at 1500). 17 Genuine issues of material fact remain on Plaintiff’s equitable claims for unjust 18 enrichment, restitution, and constructive trust. Defendant Guelton argues that he never 19 benefited from the money invested by Plaintiff. (Doc. No. 99 at 24; Guelton Decl. ¶ 22.) 20 Defendant Guelton refers to Plaintiff’s deposition in which he states that he has no evidence 21 that distributions from the BT checking were made to Guelton. (Doc. No. 132-1, Maksoud 22 Depo. at 329.) Defendant Guelton also refers to Payton’s deposition in which he states that 23 Defendant Guelton received only equity in BT for his work. (Doc. No. 124-4, Payton Depo. 24 at 8–9.) Further, Payton stated that generally he did not share with Defendant Guelton the 25 expenditures of BT. (Id. at 31.) In contrast, Plaintiff states that the money he invested was 26 used by Defendant Guelton and the other defendants for “vacations and other non-business 27 endeavors” and salaries. (Doc. Nos. 126 at 8; 132-1, Maksoud Depo. at 74–76.) Plaintiff 28 also states that Defendant Guelton and Payton authorized Hopkins to withdraw his money 11 17-cv-00362-H-WVG 1 from the BT accounts because withdrawals could only be made with approval of all three 2 directors. (Doc. No. 132-1 at 249–50.) Further, Plaintiff states that because Defendant 3 Guelton was a “director involved in the day-to-day operation of BT,” he had access to BT’s 4 accounts. (Doc. Nos. 126 at 8; 132-1, Maksoud Depo. at 267–68, 307–08.) Triable issues 5 of fact remain as to whether Defendant Guelton benefited from Plaintiff’s investment and 6 had access to BT’s accounts. Accordingly, the Court denies summary judgment on 7 Plaintiff’s claims for unjust enrichment, restitution, and constructive trust. 3 8 C. 9 Plaintiff’s claims for breach of fiduciary duties and negligence both arise from 10 Defendant Guelton’s role as a director of BT. (Doc. No. 126 at 6.) “The elements of a cause 11 of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) the 12 breach of that duty; and (3) damage proximately caused by that breach.” Mosier v. S. Calif. 13 Physicians Ins. Exch., 63 Cal. App. 4th 1022, 1044 (1998). “It is without dispute that in 14 California, corporate directors owe a fiduciary duty to the corporation and its shareholders 15 and now as set out by statute, must serve ‘in good faith, in a manner such director believes 16 to be in the best interests of the corporation and its shareholders.’” Berg & Berg 17 Enterprises, LLC v. Boyle, 178 Cal. App. 4th 1020, 1037 (2009) (citing Cal. Corp. Code 18 § 309(a)). “Directors or officers of a corporation do not incur personal liability for torts of 19 the corporation merely by reason of their official position, unless they participate in the 20 wrong or authorize or direct that it be done[.]” PMC, Inc. v. Kadisha, 78 Cal. App. 4th 21 1368 (2000) (quoting United States Liab. Ins. Co. v. Haidinger-Hayes, Inc., 1 Cal. 3d 586, 22 595 (1970)). “The breach of fiduciary duty can be based upon either negligence or fraud 23 depending on the circumstances.” Ash v. North Am. Title Company, 223 Cal. App. 4th 24 1258, 1276 (2014). 25 /// Breach of Fiduciary Duties (Claim 5) and Negligence (Claim 10) 26 27 28 3 Because these claims are equitable in nature, the Court reserves the right to bifurcate the claims and submit them to the Court for determination. 12 17-cv-00362-H-WVG 1 Plaintiff’s negligence claim also arises from Guelton’s duty as a director of BT. To 2 state a cognizable claim for negligence under California law, plaintiff “must establish four 3 required elements: (1) duty; (2) breach; (3) causation; and (4) damages.” Wells Fargo Bank, 4 N.A. v. Renz, 795 F. Supp. 2d 898, 924–25 (N.D.Cal.2011) (citing Ileto v. Glock, Inc., 349 5 F.3d 1191, 1203 (9th Cir.2003)). California law “requires directors to act in good faith and 6 with the prudence that an ordinary person would under like circumstances. However, [the 7 business judgment rule] also entitles a director to rely on information supplied by others. 8 If directors meet the requirements of the business judgment rule, they are entitled to 9 immunity from personal liability for acts of ordinary negligence under California law.” 10 F.D.I.C. v. Castetter, 184 F.3d 1040, 1044 (9th Cir. 1999). 11 It is undisputed that Defendant Guelton was a director of BT. Defendant Guelton 12 acknowledges that as such, he owed a duty to shareholders—however, he denies any breach 13 of that duty. (Doc. No. 131 at 4.) Defendant Guelton argues that although he was a director, 14 he is free from liability because he did not participate in, direct, or authorize any alleged 15 tort committed by BT or its other directors. (Doc. No. 99 at 17.) Defendant Guelton also 16 argues that the law permitted him as a non-officer director to rely on other BT management 17 without a duty of further inquiry. (Id.) Defendant Guelton further maintains that he only 18 ever acted as an advisor to BT and was given the title of director as a gesture. (Doc. Nos. 19 124 at 5; 124-4, Payton Depo. at 19.) 20 However, Plaintiff does not merely state that Defendant Guelton failed to stop the 21 alleged fraud, but rather, Plaintiff maintains that Defendant Guelton directly participated 22 in fraudulently inducing Plaintiff’s investment. (Doc. No. 126 at 6–7.) Plaintiff declares 23 under oath that he spoke to Defendant Guelton, Payton, and Hopkins prior to his investment 24 and that all three of them made false representations regarding BT’s business prospects in 25 order to induce Plaintiff’s investment. (Maksoud Decl. ¶ 4–5; Doc. No. 132-1, Maksoud 26 Depo. at 228, 309–10, 382.) Plaintiff specifies that some of these misrepresentations were 27 with regards to relationships with media companies, which was Defendant Guelton’s area 28 of expertise at BT. (Doc. No. 132-1, Maksoud Depo. at 310–11, 382.) Plaintiff also states 13 17-cv-00362-H-WVG 1 that Defendant Guelton then profited from the fraudulently induced investment, in breach 2 of his fiduciary duties. (Doc. Nos. 126 at 8; 132-1, Maksoud Depo. at 74–75.) Further, 3 Plaintiff states that Defendant Guelton and Payton authorized Hopkins to withdraw his 4 money from the BT accounts because withdrawals could only be made with approval of all 5 three directors. (Doc. No. 132-1 at 249–50.) Accordingly, genuine issues of material fact 6 remain as to whether Guelton breached any duty owed to Plaintiff arising from his position 7 as director of BT, and the Court denies summary judgment on the claims for breach of 8 fiduciary duties and negligence. 9 D. Unfair Business Practices (Bus. & Prof. Code § 17200 et seq.) (Claim 8) 10 California Business and Professional §§ 17200 et seq., known as the Unfair 11 Competition Law (“UCL”) prohibits “any unlawful, unfair or fraudulent business act or 12 practice and unfair, deceptive, untrue or misleading advertising[.]” Cal. Bus. & Prof. Code 13 § 17200. “[A] plaintiff may proceed under the UCL on three possible theories. First, 14 ‘unlawful’ conduct that violates another law is independently actionable under Section 15 17200. Alternatively, a plaintiff may plead the defendants’ conduct is ‘unfair’ within the 16 meaning of the several standards developed by the courts. Finally, a plaintiff may challenge 17 ‘fraudulent’ conduct by showing that ‘members of the public are likely to be deceived’ by 18 the challenged business acts or practices.” Stewart v. Screen Gems-EMI Music, Inc., 81 F. 19 Supp. 3d 938, 967 (N.D. Cal. 2015) (citing In re Tobacco II Cases, 46 Cal. 4th 298, 312 20 (2009); Daugherty v. Am. Honda Motor Co., Inc., 144 Cal. App. 4th 824, 838 (2006)). “A 21 business practice is unfair within the meaning of the UCL if it violates established public 22 policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to 23 consumers which outweighs its benefits.” McKell v. Washington Mut., Inc., 142 Cal. App. 24 4th 1457, 1473 (2006). Determining whether a practice was unfair “is one of fact which 25 requires a review of the evidence from both parties.” Id. 26 Plaintiff does not specifically identify which section of the UCL Defendant Guelton 27 has allegedly violated. Defendant Guelton argues that this is fatal to Plaintiff’s claims, 28 citing to Khoury v. Maly’s of California, Inc., 14 Cal. App. 4th 612 (1993). However, the 14 17-cv-00362-H-WVG 1 court in Khoury only required that a plaintiff state with reasonable particularity the facts 2 supporting the statutory elements of a statutory violation. Id. at 619. Here, Plaintiff has 3 created factual disputes that fall within the broad umbrella of the UCL. For example, 4 Plaintiff’s claims for intentional misrepresentation and false promise, if successful, would 5 permit a UCL claim under the first or third theories. See Stewart, 81 F. Supp. 3d at 967. 6 Genuine issues of material fact remain on the claims that could give rise to a UCL claim. 7 Further, factual inquiry is necessary to determine whether any actions by Defendant 8 Guelton could be categorized as “unfair” under the second theory. See McKell, 142 Cal. 9 App. 4th at 1473. Accordingly, the Court denies summary judgment on Plaintiff’s UCL 10 claim. 11 E. 12 In his Second Amended Compliant, Plaintiff alleges a cause of action for an 13 accounting of the uses of his investment. (Doc. No. 35 at 25.) “An accounting cause of 14 action is equitable and may be sought where the accounts are so complicated that an 15 ordinary legal action demanding a fixed sum is impracticable.” Hamilton v. Bank of Blue 16 Valley, 746 F. Supp. 2d 1160, 1175 (E.D. Cal. 2010) (citing Civic Western Corp. v. Zila 17 Industries, Inc., 66 Cal. App. 3d 1, 14 (1977)). To succeed in a claim for accounting, 18 Plaintiff must show (1) a fiduciary relationship and (2) “an unknown balance due from the 19 Defendants that cannot be ascertained without an accounting.” Baker v. Varitalk, Inc., 2008 20 WL 11319707, *4 (C.D. Cal. Feb. 6, 2008); see also Kritzer v. Lancaster, 96 Cal. App. 2d 21 1, 6–7 (1950). Accounting (Claim 15) 22 Defendant Guelton argues that an accounting is unnecessary because the sum owed 23 to Plaintiff is certain, equaling the amount of Plaintiff’s investment. (Doc. No. 99 at 25.) 24 Further, Defendant Guelton argues that he never had access to BT’s financial accounts and 25 never had possession of Plaintiff’s investment. (Doc. Nos. 99 at 17; 124-4, Payton Depo. 26 at 8–9.) Plaintiff does not address the claim for accounting in either his opposition or his 27 supplemental opposition. However, Plaintiff states that Guelton owed him fiduciary duties 28 and had access to BT’s financial accounts as a director of BT. (Doc. Nos. 126 at 6; 132-1, 15 17-cv-00362-H-WVG 1 Maksoud Depo. at 308.) Plaintiff has demonstrated genuine dispute of material fact 2 showing that there is some unknown balance possibly due to him resulting from 3 complicated transactions involving alleged misappropriation of his investment by Guelton 4 and the other directors. (Doc. Nos. 126 at 8; 132-1, Maksoud Depo. at 74–75.) Therefore, 5 the Court denies summary judgment on the accounting claim. 4 6 F. 7 “The common count is a general pleading which seeks recovery of money without 8 specifying the nature of the claim.” Title Ins. Co. v. State Bd. of Equalization, 4 Cal. 4th 9 715, 731 (1992). “A claim for Money Had and Received makes a defendant indebted to a 10 plaintiff for money had and received by the defendant for the use of the plaintiff.” Lincoln 11 Nat’l Life Ins. Co. v. McClendon, 230 F. Supp. 3d 1180, 1190 (C.D. Cal. 2017) (citation 12 and internal quotation marks omitted). For a claim of money had and received, a plaintiff 13 must show: “(1) defendant received money; (2) the money defendant received was for 14 plaintiff's use; and (3) defendant is indebted to plaintiff.” Id. (citation omitted). Common Count (Money Had and Received) (Claim 6) 15 The Court concludes that Plaintiff’s claim for money had and received fails because 16 Defendant Guelton did not receive Plaintiff’s investment. For example, the court in Lincoln 17 National Life Insurance held that a defendant “received” the plaintiff’s money where 18 plaintiff produced checks to defendant’s deceased mother endorsed by defendant and 19 defendant admitted that she deposited the checks. Id. at 1191. Here, Defendant Guelton 20 was not the recipient of Defendant Guelton’s $250,000 investment. Rather, as shown in 21 Plaintiff’s stock purchase agreement with BT, which is signed by Payton as CEO, BT was 22 the recipient of the investment. (Doc. No. 99-18, Ex. O.) In contrast, Plaintiff’s claims for 23 unjust enrichment, restitution, and constructive trust require that Plaintiff demonstrate that 24 Defendant Guelton “benefited” or “gained” from Plaintiff’s investment. See Pegg, 782 25 F.2d at 1500; Troyk, 171 Cal. App. 4th at 1339; Peterson, 164 Cal. App. 4th at 1593. 26 27 28 4 As with Plaintiff’s claims for unjust enrichment, restitution, and constructive trust, because this claim is equitable in nature, the Court reserves the right to bifurcate this claim and submit it to the Court for determination. 16 17-cv-00362-H-WVG 1 Although Defendant Guelton was not the recipient of Plaintiff’s investment, Plaintiff has 2 created genuine issues of material fact as to whether Defendant Guelton benefited from his 3 investment. Accordingly, because Defendant Guelton was not the recipient of Plaintiff’s 4 investment, the Court grants Defendant Guelton’s motion for summary judgment as to 5 Plaintiff’s claim for common count (money had and received). 6 7 G. Intentional and Negligent Interference with Prospective Economic Relations (Claims 7, 9) 8 Plaintiff has failed to provide any evidence showing that Defendant Guelton 9 intentionally or negligently interfered with Plaintiff’s prospective economic relations. The 10 elements of intentional interference with prospective economic relations are: “(1) an 11 economic relationship between the plaintiff and a third party with the probability of future 12 economic benefit to plaintiff, (2) defendant’s knowledge of the relationship, (3) intentional 13 wrongful acts by defendant intended to disrupt the relationship, (4) actual disruption, and 14 (5) economic harm to plaintiff.” Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 15 1151 (9th Cir. 2008); see Green Hills Software, Inc. v. Safeguard Scientifics and SPC 16 Private Equity Partners, 33 Fed. Appx. 893, 894 (9th Cir. 2002) (citing Della Penna v. 17 Toyota Motor Sales, U.S.A. Inc., 11 Cal. 4th 376, 389 (1995)). Plaintiff must “identify with 18 particularity the relationships or opportunities with which [d]efendant is alleged to have 19 interfered.” UMG Recording, Inc. v. Global Eagle Entm’t, Inc., 117 F. Supp. 3d 1092, 1118 20 (C.D. Cal. 2015). “Allegations that a defendant interfered with a relationship with an ‘as 21 yet unidentified’ customer will not suffice.” Id. at 1117 (citing Westside Ctr. Assocs. v. 22 Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 527 (1996)). 23 Negligent interference with prospective economic relations requires: “(1) an 24 economic relationship existed between the plaintiff and a third party that contained a 25 reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant 26 knew of the existence of the relationship and was aware or should have been aware that if 27 it did not act with due care its actions would interfere with this relationship and cause 28 plaintiff to lose in whole or in part the probable future economic benefit or advantage of 17 17-cv-00362-H-WVG 1 the relationship; (3) the defendant was negligent; and (4) such negligence caused damage 2 to the plaintiff in that the relationship was actually interfered with or disrupted and the 3 plaintiff lost in whole or in part the economic benefits or advantage reasonably expected 4 from the relationship.” N. Am. Chem. Co. v. Superior Court, 59 Cal. App. 4th 764, 69 5 (1997). Like a claim for intentional interference with prospective economic relations, a 6 claim for negligent interference requires Plaintiff plead with particularity “the relationships 7 or opportunities with which [d]efendant is alleged to have interfered.” UMG Recording, 8 117 F. Supp. 3d at 1118. 9 Defendant Guelton argues that Plaintiff’s claims for intentional and negligent 10 interference with prospective business relations fail because Plaintiff has not proven: that 11 he had an actual relationship with a third party; that Defendant Guelton had knowledge of 12 Plaintiff’s prospective economic relations; and that interference with any relationship was 13 caused by Defendant Guelton. (Doc. No. 99 at 20.) In response, Plaintiff states he had 14 opportunities with Facebook, but liquidated his Facebook stock in order to invest in BT. 15 (Doc. No. 132-1, Maksoud Depo. at 69.) Plaintiff testifies that this was motivated by 16 Defendant Guelton’s alleged false misrepresentations. (Id. at 70.) However, Plaintiff has 17 failed to show any evidence demonstrating that Defendant Guelton knew of Plaintiff’s 18 prospective business relations. In his deposition testimony, Plaintiff states that he “never 19 told anyone about what [he was] doing” with regards to liquidating his Facebook stock. 20 (Doc. No. 132-1, Maksoud Depo. at 68.) He only states that Hopkins “could have easily 21 known that [he] may have to sell [his] Facebook shares[.]” At no point does he state that 22 Defendant Guelton knew about such business opportunities. Plaintiff has failed to produce 23 any affirmative evidence showing that a jury could resolve his claims against Defendant 24 Guelton for intentional and negligent interference in his favor. See Anderson, 477 U.S. at 25 256. Accordingly, the Court grants Defendant Guelton’s motion for summary judgment as 26 to Plaintiff’s claims for intentional and negligent interference with prospective economic 27 relations. 28 /// 18 17-cv-00362-H-WVG 1 H. 2 In his Second Amended Complaint, Plaintiff asks the Court for “a judicial 3 determination that he is the exclusive owner of all tangible and intangible rights, including 4 all intellectual property rights and patents in both Kaliki and OnSay” pursuant to 28 U.S.C. 5 § 2201 and California Code of Civil Procedure § 1060. (Doc. No. 35 at 26.) “It is well- 6 established that federal courts sitting in diversity must apply state substantive law and 7 federal procedural rules.” Clark v. Allstate Ins. Co., 106 F. Supp. 2d 1016, 1018 (S.D. Cal. 8 2000) (citing Computer Economics, Inc. v. Gartner Group, Inc., 50 F. Supp. 2d 980, 986 9 (S.D.Cal.1999)). Therefore, courts sitting in diversity have consistently applied Civil Code 10 of Civil Procedure § 1060 to declaratory judgment claims rather than the Declaratory 11 Judgment Act. See Schwartz v. U.S. Bank, Nat. Ass’n, 2012 WL 10423214, at *15 (C.D. 12 Cal. Aug. 3, 2012) (compiling cases). Thus, the Court applies California law.5 Declaratory Judgment (Claim 16) 13 “The purpose of a declaratory judgment [under Cal. Code Civ. P. § 1060] is to serve 14 some practical end in quieting or stabilizing an uncertain or disputed jural relation.” Meyer 15 v. Sprint Spectrum L.P., 45 Cal. 4th 634, 647 (2009) (quoting Maguire v. Hibernia Savings 16 & Loan, 23 Cal. 2d 719, 729 (1944)). “To qualify for declaratory relief, [a party] would 17 have to demonstrate its action presented two essential elements: ‘(1) a proper subject of 18 declaratory relief, and (2) an actual controversy involving justiciable questions relating to 19 [the party’s] rights or obligations.’” Jolley v. Chase Home Fin., LLC, 213 Cal. App. 4th 20 872, 909 (2013) (quoting Wilson & Wilson v. City Council of Redwood City, 191 Cal. 21 App. 4th 1559, 1582 (2011)). Declaratory judgment is not used to remedy past wrongs, and 22 therefore “where there is an accrued cause of action for an actual breach of contract or 23 other wrongful act, declaratory relief may be denied.” Baldwin v. Marina City Properties, 24 Inc., 79 Cal. App. 3d 393, 407 (1978). 25 Defendant Guelton argues that Plaintiff has failed to show that an actual controversy 26 exists between Defendant Guelton and Plaintiff regarding the rights to Kaliki or Onsay. 27 28 5 The parties do not address which declaratory judgment statute should be applied. 19 17-cv-00362-H-WVG 1 (Doc. No. 99 at 27.) Defendant Guelton argues that since BT’s forfeiture, he has not had 2 any further involvement with Kaliki or Onsay and does not own any intellectual property 3 rights to Kaliki or Onsay. (Guelton Decl. ¶ 20–21.) Guelton states that the only intellectual 4 property right he is aware of relating to BT is a trademark of the name “NavAds,” which 5 he learned of through an email from Hopkins. (Id. ¶ 20; Doc. No. 99-28, Exh. Y.) Plaintiff 6 does not address his claim for declaratory judgment in either his opposition or his 7 supplemental opposition. Plaintiff has failed to produce any evidence demonstrating that 8 an actual controversy regarding the ownership of BT’s property rights exists between 9 himself and Defendant Guelton. Accordingly, the Court grants Defendant Guelton’s 10 motion for summary judgment on Plaintiff’s claim for declaratory judgment. 11 CONCLUSION 12 For the foregoing reasons, the Court denies in part and grants in part Defendant 13 Guelton’s motion for summary judgment. Specifically, the Court denies Defendant 14 Guelton’s motion for summary judgment as to Plaintiff’s claims for: intentional 15 misrepresentation, aiding and abetting fraud, false promise, unjust enrichment, restitution, 16 constructive trust, breach of fiduciary duties, negligence, unfair business practices, and 17 accounting. The Court grants Defendant Guelton’s motion for summary judgment as to 18 Plaintiff’s claims for: common count (money had and received), intentional interference 19 with prospective economic relations, negligent interference with prospective economic 20 relations, and declaratory judgment. 21 IT IS SO ORDERED. 22 DATED: November 13, 2018 23 24 MARILYN L. HUFF, District Judge UNITED STATES DISTRICT COURT 25 26 27 28 20 17-cv-00362-H-WVG
]]>
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.
