ROBERT FOLEY, ET AL VS. COBALT POLYMERS, ET AL

August 12, 2026 Law and Motion, Complex Law and Motion, and UD Law and Motion Calendars Judge Nicole S. Healy Department 28 ________________________________________________________________________ 2:00 PM LINE 10 25-CIV-10154 ROBERT FOLEY, ET AL VS. COBALT POLYMERS, ET AL

ROBERT FOLEY GEORGE MOSCHOPOULOS COBALT POLYMERS YANO L. RUBINSTEIN

DEFENDANTS COBALT POLYMERS AND BARRY SCHNUR’S DEMURRER TO CAUSE OF ACTIONS 2 AND 8-10 IN PLAINTIFFS’ COMPLAINT

TENTATIVE RULING:

Defendants Cobalt Polymers and Barry Schnur’s Demurrer to the Second, Eighth, Ninth, and Tenth Causes of Action in plaintiff’s Complaint are SUSTAINED in part, with leave to amend and OVERRULED, in part.

Any amended complaint must be filed within ten (10) days of notice of entry of the formal order.

A. Legal Standard

“[I]t is well settled that a general demurrer admits the truth of all material factual allegations in the complaint [citation]; that the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court [citations]; and that plaintiff need only plead facts showing that he may be entitled to some relief [citation].” (John’s Grill, Inc. v. The Hartford Financial Services Group, Inc. (2024) 16 Cal.5th 1003, 1013 (John’s Grill), quoting Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 (Alcorn).)

A court reviewing a demurrer accepts as true the facts alleged in the complaint as well as those of which it may take judicial notice (John’s Grill, supra, 16 Cal.5th at p. 1008, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318), but does not “assume the truth of contentions, deductions or conclusions of law.” (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967 (Aubry).)

B. Second Cause of Action (Retaliation for Asserting Wage Rights, Labor Code, Section 98.6)

To establish a prima facie cause of action for retaliation under Labor Code, section 98.6, a plaintiff must prove three elements: (1) the plaintiff engaged in protected activity; (2) the employer subjected the plaintiff to an adverse employment action; and (3) a causal link exists between the protected activity and the adverse action. (St. Myers v. Dignity Health (2019) 44 Cal. App. 5th 301, 314.) The statute broadly prohibits any person from discharging, discriminating against, retaliating against, or taking any adverse action against an employee or applicant for employment who exercises rights protected under the Labor Code. (Lab. Code, §

August 12, 2026 Law and Motion, Complex Law and Motion, and UD Law and Motion Calendars Judge Nicole S. Healy Department 28 ________________________________________________________________________ 98.6.) Making a written or oral complaint that the employee is owed unpaid wages is an enumerated category of protected activity. (Ibid.)

Defendants argue that plaintiff has not stated a claim for retaliation based on a complaint of unpaid wages because plaintiff’s 40% equity interest in defendant Cobalt Polymers does not constitute wages. Incentive compensation such as bonuses, profit-sharing plans, and restricted stock can constitute wages under Labor Code, sections 200-202, with the key inquiry being whether the equity compensation is provided as payment for labor performed by the employee. (Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 621 (Schachter).)

Plaintiff alleges that “[i]n recognition of Foley’s efforts and exceptional performance, and in consideration for Foley’s continued employment with Cobalt, Defendant Schnur agreed to grant, and in fact granted, to Foley 40% of Cobalt’s common stock as of January 1, 2011.” (Complaint, ¶ 15.) However, plaintiff Robert Foley’s complaint is not that he did not receive 40% of Cobalt’s shares. Rather, he seeks “recognition and valuation of his 40% equity interest” and contends that he did not receive “the corresponding distributions he should have received since 2011.” (Id., ¶ 47.) Defendants argue that while a stock grant may be compensation for services performed as an employee, the right to receive dividends or other distributions is a right of ownership. That is, they argue that only a shareholder has the right to receive dividends and distributions. (Mot., at p. 5; Reply, at pp. 4-5.)

Where a shareholder is also an employee, the funds they receive from the company may be wages or dividends. (See Schachter, supra, 47 Cal.4th at p. 621; Perata v. Oakland Scavenger Co. (1952) 111 Cal.App.2d 378 [the portion of the company’s payments to employeeshareholders that reflected their labor were wages while the remainder was a dividend]; Kohn v. Kohn (1950) 95 Cal.App.2d 708, 715 [“however denominated, a distribution of earnings to corporate stockholders may be treated as dividends where that is their practical effect and justice will be served by so treating them.”].)

Wages reflect “labor, work, or service” on behalf of an enterprise. Labor Code, section 200, defines “wages” to “include[] all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” (Lab. Code, § 200, subd. (a).) “Labor” is defined to “include[] labor, work, or service whether rendered or performed under contract, subcontract, partnership, station plan, or other agreement if the labor to be paid for is performed personally by the person demanding payment.” (Id., subd. (b).)

Dividends are not received in return for “labor,” but rather are an attribute of ownership. (See Stephenson v. Drever (1997) 16 Cal.4th 1167, 1177 [“A shareholder also has valuable property rights. Foremost among these is the right to receive dividends. [citation] When a dividend is lawfully declared by the board of directors it vests in the owner of record of the shares and creates a debt in his favor against the corporation.”].)

Here, plaintiff has not alleged that he did not receive his salary. His complaint is that he has not received “distributions” related to his 40% shareholdings for the past fifteen years. That

August 12, 2026 Law and Motion, Complex Law and Motion, and UD Law and Motion Calendars Judge Nicole S. Healy Department 28 ________________________________________________________________________ is not a claim for retaliation arising out of a claim for unpaid wages, but rather is a claim that he was deprived of a right accruing to him as a shareholder.

The Demurrer to this cause of action is accordingly SUSTAINED with leave to amend.

C. Eighth Cause of Action (Declaratory Relief)

Defendants argue that this cause of action restates the claims which are put at issue by plaintiff’s other causes of action. Declaratory relief may be sought alone or with other relief. (Columbia Picture Corp. v. De Toth (1945) 26 Cal.2d 753, 761.) The Complaint seeks a judicial declaration resolving the parties’ rights and duties with respect to the following issues:

a. Plaintiff holds a valid and enforceable 40% ownership interest in Cobalt;

b. Defendants owe fiduciary duties to plaintiff arising from his status as a minority shareholder;

c. Defendants are obligated to recognize, account for, and fairly value plaintiff’s ownership interest;

d. Defendants may not forfeit, repudiate, or deny plaintiff’s earned ownership interest through unilateral action or termination of employment; and

e. Plaintiff is entitled to equitable relief, including accounting, valuation, and such further relief as may be appropriate under the Corporations Code and principles of equity.

(Complaint, ¶ 117.)

There is no dispute that there is an actual, present controversy between the parties as to these issues. Plaintiff argues that verdicts on his other causes of action will not definitively establish whether he owns a 40% interest in defendant Cobalt Polymers. It is correct that money damages awarded pursuant to plaintiff’s other causes of action would not resolve that question as it pertains to “forward-looking consequences for corporate governance, information access, future distributions, and the parties’ ongoing obligations.” (Opp., at p. 6:22-23.) The cause of action for declaratory relief is therefore proper.

The Demurrer to this cause of action is accordingly OVERRULED.

D. Ninth Cause of Action (Breach of Implied in Fact Contract)

The elements of a claim for breach of an implied-in-fact contract require allegations of facts showing: (1) parties capable of contracting; (2) their consent; (3) a lawful object; and (4) sufficient consideration. (Civ. Code, § 1550.) Defendants argue that the Complaint does not allege when the agreement was formed, what specific conduct manifested mutual assent, the terms of repayment, and whether the contract was for an illegal purpose.

August 12, 2026 Law and Motion, Complex Law and Motion, and UD Law and Motion Calendars Judge Nicole S. Healy Department 28 ________________________________________________________________________ The Complaint alleges that parties entered the implied-in-fact contract during plaintiff’s employment and tenure as an officer and shareholder of defendant Cobalt Polymers. (Complaint, ¶ 121.) Defendants’ alleged conduct reflecting the agreement allegedly included “making payments to Plaintiff and toward Plaintiff’s tax liabilities over an extended period of time, acknowledging that those liabilities arose from ownership attribution rather than cash compensation, and expressly characterizing the payments as advances against Plaintiff’s future equity value. (Id., ¶ 123.)

The terms of repayment are alleged to be “that the corporation would pay Plaintiff’s personal tax liabilities arising from ownership-attributed income, and that such payments would be treated as a loan or advance to Plaintiff, to be reconciled and repaid solely from future equity distributions, liquidation proceeds, or other monetization of Plaintiff’s ownership interest, and not as a personal obligation requiring immediate repayment.” (Id., ¶ 122.) These allegations sufficiently plead the ultimate facts required to meet the elements of the cause of action.

As to the issue of whether the contract was formed for an unlawful purpose, the Complaint does not allege an unlawful purpose.

The Demurrer to this cause of action is accordingly OVERRULED.

E. Tenth Cause of Action (Promissory Estoppel)

The elements of a cause of action for promissory estoppel are: (1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance by the party to whom the promise is made; (3) actual reliance; and (4) injury to the party asserting estoppel caused by the reliance. (Laks v. Coast Fed. Sav. & Loan Ass’n (1976) 60 Cal.App.3d 885, 890.) Defendants argue that the Complaint omits facts that are necessary to establish that the promise was clear and unambiguous such as which individual made the promise, when it was made, its specific terms, and whether it was oral or written.

The Complaint alleges a promise “that the company would pay Plaintiff’s tax liabilities arising from ownership-attributed income for which Plaintiff did not receive corresponding cash distributions, and that such payments would be treated as a loan or advance to be reconciled solely through future equity distributions or liquidation proceeds.” (Complaint, ¶ 130.) Those terms are sufficiently definite to form a clear and unambiguous promise, and further specificity is not required of a promissory estoppel claim.

The Demurrer to this cause of action is accordingly OVERRULED.

If the tentative ruling is uncontested, it shall become the order of the court. Thereafter, plaintiffs’ counsel shall prepare a written order consistent with the court’s ruling for the court’s signature, pursuant to California Rules of Court, Rule 3.1312 and Local Rule 3.403(b)(iv), and provide written notice of the ruling to all parties who have appeared in this action. The order should be e-filed only, do not email or mail a hard copy to the court.

August 12, 2026 Law and Motion, Complex Law and Motion, and UD Law and Motion Calendars Judge Nicole S. Healy Department 28 ________________________________________________________________________ 2:00 PM LINE 11 25-CIV-10154 ROBERT FOLEY, ET AL VS. COBALT POLYMERS, ET AL

ROBERT FOLEY GEORGE MOSCHOPOULOS COBALT POLYMERS YANO L. RUBINSTEIN

DEFENDANTS COBALT POLYMERS AND BARRY SCHNUR’S MOTION TO STRIKE VARIOUS PORTIONS OF COMPLAINT

TENTATIVE RULING:

Defendants Cobalt Polymers and Barry Schnur’s Motion to Strike portions of plaintiff’s Complaint is DENIED.

Defendants move to strike references to punitive damages and alter ego allegations from plaintiff’s Complaint.

A. Punitive Damages

For punitive damages allegations to survive a motion to strike, a plaintiff must plead ultimate facts, rather than mere legal conclusions, showing that the defendant engaged in conduct constituting malice, oppression, or fraud as defined by Civil Code section 3294. Courts reviewing the ruling apply a de novo standard and read all allegations as a whole, in context, assuming their truth. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253; Today’s IV, Inc. v. Los Angeles County Metro. Transportation Auth. (2022) 83 Cal.App.5th 1137.)

Here, plaintiff points to his specific allegations of defendants’ actions taken with knowledge of plaintiff’s right to be free from retaliation and rights as a family member of a protected whistleblower, termination of plaintiff William Foley merely because his father was a whistleblower, and intentional abuse of control, as being ultimate facts rather than mere statutory language. (Opp., at p. 11:11-35; see Complaint, ¶¶ 65, 79, 80, 103.) Taking these allegations as true, and reading them as a whole in the context of the pleading, they sufficiently allege malice or oppression under Civil Code section 3294.

The Motion to Strike is accordingly DENIED as to the punitive damages allegations.

B. Alter Ego Allegations

Alter ego allegations are sufficient where they allege specific, non-conclusory facts satisfying a two-pronged test: (1) such a unity of interest and ownership between the corporation and its equitable owner that their separate personalities do not in reality exist, and (2) an inequitable result would follow if the acts in question are treated as those of the corporation alone. (See JPV I L.P. v. Koetting (2023) 88 Cal. App. 5th 172; Toho-Towa Co. v. Morgan Creek Prods. (2013) 217 Cal.App.4th 1096 (Toho-Towa.) Application of the alter ego doctrine does not depend upon pleading or proving fraud. (Toho-Towa, supra, 217 Cal.App.4th 1096.) It is sufficient to allege that adherence to the fiction of the separate existence of the corporation would