DAILY REALTY PARTNERS, LP VS. KOPPI

funds. (Compl., ¶ 58.) Thus, Cloonan has failed to demonstrate Plaintiff’s claims are barred by law and, thus, has failed to show a reasonable possibility of prevailing in the lawsuit.

Accordingly, the Motion is denied.

8. DAILY REALTY PARTNERS, 1. DEMURRER TO AMENDED COMPLAINT LP VS. KOPPI 2025-01517126 Defendant Megan Koppi as Trustee of The MMD Trust, established July 14, 2015’s Demurrer to Plaintiffs Daily Realty Partners, LP and Daily Downey Avenue, LLC’s First Amended Complaint is OVERRULED in part and SUSTAINED in part with 20 days leave to amend.

First Cause of Action for Breach of Written Contract – DDA Agreement

“To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant’s breach and resulting damage.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307 [citation omitted].)

Plaintiffs allege:

- Defendants are parties to a written operating agreement dated 12/21/17, which governs DDA (the DDA Agreement). (FAC ¶ 47.) - DDA has fulfilled all obligations and conditions which were required to perform under the DDA Agreement, except for those obligations which were excused. (FAC ¶ 49.) - Section 6.6 of the DDA agreement provides that, “[i]n accordance with the [California Revised Uniform Limited Liability Company] Act, a Member may, under certain circumstances, be required to return the Company, for the benefit of the Company’s creditors, amounts previously distributed to the Member.” (FAC ¶ 50.) - Defendants breached the Agreement by refusing to return a portion of the February 2023 distribution to Defendants to cover their pro rata share of DDA’s legal expenses owed to DDA’s creditors. (FAC ¶ 51.) - As a direct and proximate result of Defendants’ breaches of contract, DDA has been damaged in the amount to be determined at trial. (FAC ¶ 52.)

These allegations are sufficient at the pleading stage.

To the extent Defendant contends the DDA does not impose a repayment obligation, that analysis is not appropriate for purposes of demurrer.

The Court OVERRULES the demurrer to the first cause of action.

Second Cause of Action for Breach of Implied Contract – Letter Agreement

“A cause of action for breach of implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor’s conduct.” (Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172, 182.)

Plaintiffs allege:

- The 2/8/23 letter accompanying the distribution to Defendants set forth terms and conditions for the distribution, expressly stating Defendants would be invoiced for a pro rata share of legal expenses that exceeded the amounts already held back from Plaintiffs’ owners. (FAC ¶ 54.) - The parties’ words (i.e., the letter) and conduct (e.g., Defendants accepting and depositing the distribution without objection) created a contract (the Letter Agreement) under which Koppi was required to return from the February 2023 distribution to her/MMD the money necessary to cover a pro rata share of Plaintiffs’ legal expenses. (FAC ¶ 55.) - Plaintiffs did all, or substantially all of, the significant acts the implied contract/Letter Agreement required. (FAC ¶ 56.) - Defendants breached the Letter Agreement by refusing to return a portion of the February 2023 distribution to Defendants to cover their pro rata share of Plaintiffs’ legal expenses. (FAC ¶ 57.) - As a direct and proximate result of Defendants’ breach of the implied contract/Letter Agreement, Plaintiffs have been damaged in an amount to be proved at trial. (FAC ¶ 58.)

These allegations are sufficient at the pleading stage.

Moreover, redundancy of a cause of action is not grounds for sustaining a demurrer. (See Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 889-890.)

The Court OVERRULES the demurrer to the second cause of action.

Third Cause of Action Promissory Estoppel

“The elements of a cause of action for promissory estoppel are (1) a promise, (2) the reasonable expectation by the promisor that the promise will induce reliance or forbearance, (3) actual reliance or forbearance, and (4) the avoidance of injustice by enforcing the promise.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1412.) “The vital principle is that he who by his language or conduct leads another to do what he would not otherwise have done shall not subject such person to loss or injury by disappointing the expectations upon which he acted.” (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945 [citation omitted].)

Plaintiffs allege:

- Defendants made promises and representations to Plaintiffs that, if Plaintiffs distributed sales proceeds to Defendants, Defendants would return a portion of that distribution to cover Defendants’ pro rata share of Plaintiffs’ legal expenses. (FAC ¶ 60.) - Plaintiffs reasonably and justifiably relied on Defendants’ promises, and Defendants intended Plaintiffs to rely on Defendants’ promises. (FAC ¶ 61.) - Defendants did not intend to ever return any of the distribution to Plaintiffs when they made representations to Plaintiffs to the contrary. (FAC ¶ 62.) - Defendants did not perform the promised act and have not returned any of the February 2023 distribution to Plaintiffs. (FAC ¶ 63.) - As a direct and proximate result of Defendants’ failure to act as promised, Plaintiffs have been damaged in an amount to be proved at trial. (FAC ¶ 64.) - Plaintiffs’ reliance on Defendants’ representations was a substantial factor in the harm that Plaintiffs suffered. (FAC ¶ 65.)

These allegations are sufficient at the pleading stage.

The Court OVERRULES the demurrer to the third cause of action

Fourth Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing

“The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation.” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031 [citation omitted].) “The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.” (Ibid. [citation omitted].) “In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.” (Id. at pp. 1031-1032 [citation omitted].) “There is no obligation to deal fairly or in good faith absent an existing contract.” (Id. at p. 1032 [citations omitted].)

“If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395).

Plaintiffs allege:

- DRP is governed by an agreement of limited partnership (the DRP Agreement). (FAC ¶ 67.) - The DRP Agreement, the DDA Agreement, and/or the Letter Agreement are binding and enforceable agreements. (FAC ¶ 68.) - Plaintiffs did all, or substantially all of, the significant acts that the DRP Agreement, the DDA Agreement, and/or the Letter Agreement required. (FAC ¶ 69.) - The DRP Agreement, the DDA Agreement, and/or the Letter Agreement each included an implied covenant of good faith and fair dealing that required the parties not to do anything that would have the effect of impairing, destroying, or injuring the rights of the other party to receive the benefits of their agreement. The implied covenant further required that each party would do all things reasonably contemplated by the terms of the DRP Agreement, the DDA Agreement, and/or the Letter Agreement to accomplish each agreement’s purposes. (FAC ¶ 70.) - As detailed above, while the other owners of DRP and DDA have returned portions of their distributions to cover their pro rata shares of Plaintiffs’ legal expenses, Defendants have refused to do the same—accepting an outsized distribution and daring Plaintiffs to force them to return any of it. (FAC ¶ 71.) - Defendants’ actions have prevented Plaintiffs from receiving the benefits of the DRP Agreement, the DDA Agreement, and/or the Letter Agreement—leaving them without the funds necessary to cover their ever-mounting legal expenses despite defeating each of Defendants’ claims against them to date. (FAC ¶ 72.)

As such, Plaintiffs essentially allege Defendants breached their agreements with them by failing to pay their pro rata share of legal expenses and seek the same damages sought by their cause of action for breach of contract.

The Court SUSTAINS the demurrer as to the fourth cause of action with leave to amend.

Fifth Cause of Action for Violation of Corporations Code § 15905.08 et seq.

Section 15905.08, subdivision (b) prohibits a limited partnership from making a distribution if, after the distribution is made, the partnership would be unable to pay its debts and obligations as they become due in the ordinary course of its activities.

Section 15905.09, subdivision (b) provides, “A partner or transferee that received a distribution knowing that the distribution to that partner or transferee was made in violation of Section 15905.08 is personally liable to the limited partnership but only to the extent that the distribution received by the partner or transferee exceeded the amount that could have been properly paid under Section 15905.08.”

Plaintiffs allege:

- In November 2022, Petit, who managed DRP and DDA sent Koppi a letter informing her of his estimate of $400,000 that would need to be set aside for legal expenses. (FAC ¶ 35.) - On 2/8/23, Petit sent Koppi a letter and a cashier’s check. The letter stated the money was MMD’s share of net sales proceeds less her share of the lawsuit defense fund and stated, “Should the defense of the lawsuit require more than this holdback, the business entities will send you an invoice.” (FAC ¶ 36.)

Plaintiffs allege Koppi was informed of an estimate for legal expenses and that at the time of distribution was told she was being paid her share of the proceeds less the legal defense fund and would be sent an invoice “[s]hould the defense of the lawsuit require more.” As such, Plaintiffs do not allege sufficient facts demonstrating Defendants received the distribution knowing it was in violation of section 15905.08.

The Court SUSTAINS the demurrer as to the fifth cause of action with leave to amend.

Sixth Cause of Action for Violation of Corporations Code § 17704.05 and 17704.06

Corporations Code section 17704.05 subdivision (b) prohibits a limited liability company from making a distribution if, after the distribution is made, the limited liability company would be unable to pay its debts and obligations as they become due in the ordinary course of its activities.

Corporations Code section 17704.06, subdivision (c) provides, “A person that receives a distribution knowing that the distribution to that person was made in violation of Section 17704.05 is personally liable to the limited liability company but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under Section 17704.05.”

The language of these statutes tracks Corporations Code sections 15905.08 and 15905.09 but relate to limited liability companies. As such, the Court applies the analysis set forth above with respect to the fifth cause of action.

The Court SUSTAINS the demurrer as to the sixth cause of action with leave to amend.

Seventh Cause of Action for Declaratory Relief

To qualify for declaratory relief, an action must present two essential elements: 1) a proper subject of declaratory relief, and 2) an actual controversy involving justiciable questions relating to the rights of obligations of a party. (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546; Code Civ. Proc. § 1060.)

The “proper subjects” of declaratory relief are set forth in Code of Civil Procedure section 1060 and other statutes, and include contracts and written instruments and statutory interpretation. (See Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410; Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1095.)

Plaintiffs allege a controversy has arisen as to “whether Defendants are required to return any portion of the February 2023 distribution under the DRP Agreement, the DDA Agreement, and/or the Letter Agreement to the extent needed to cover Plaintiffs’ accruing litigation expenses.” (FAC ¶ 85.)

As such, Plaintiffs “desire a judicial determination of the parties’ rights and obligations under the DRP Agreement; the DDA Agreement; the Letter Agreement; and/or Corporations Code sections 15905.08 et seq., 17704.05, and 17704.06. (FAC ¶ 86.)

This is sufficient at the pleading stage.

The Court OVERRULES the demurrer as to the seventh cause of action.

2. MOTION TO STRIKE PORTIONS OF COMPLAINT

Defendant Megan Koppi as Trustee of The MMD Trust, established July 14, 2015’s Motion to Strike Portions of Plaintiffs Daily Realty Partners, LP and Daily Downey Avenue, LLC’s First Amended Complaint is DENIED.

Code of Civil Procedure section 436, subdivision (a), provides the court may strike “any irrelevant, false, or improper matter” in a pleading.

Defendants move to strike various allegations in the FAC on the ground they are improper, irrelevant and misleading.

The allegations at issue relate to background and context for the action as well as the elements necessary to allege various causes of action. The Court does not find them to be so improper, irrelevant and misleading as to be stricken.

Defendant also moves to strike Plaintiffs’ prayer for attorneys’ fees on the ground Plaintiffs fail to allege any statute or contractual provision entitling Plaintiffs to attorneys’ fees.

While Plaintiffs contend both the DDA and DRP Agreements, attached to the complaint and incorporated by reference, include attorneys’ fee provision, Defendant contends “entitlement depends on the claims and contractual provisions at issue.” (Reply at 10:10.).

To the extent Defendants contend Plaintiffs have not demonstrated the agreements establish Plaintiffs are entitled to attorneys’ fees in this action, that analysis is not appropriate for purposes of a motion to strike.