Schatz vs. New Life Treatment Center, Inc

and Plaintiff, therefore, is entitled to her attorneys’ fees and costs incurred herein in a sum to be proven at trial from BTG.” (Complaint, ¶ 29.)

To the extent that Plaintiff asserts in the opposition that the request for reasonable attorney’s fees is allowed under the equitable "common fund" and "substantial benefit" doctrines, there are no allegations in the Complaint as to the application of these doctrines to support a claim for attorney’s fees.

In reply, Li asserts that the common fund and substantial benefit doctrines are post-judgment equitable remedies that are applied by the court after a plaintiff has actually conferred a benefit on the corporation through a successful derivative action citing primarily to Cziraki v. Thunder Cats, Inc. (2003) 111 Cal.App.4th 552, 563, but cites to no authority providing that a party cannot seek attorney’s fees based on the equitable “common fund” and “substantial benefit” doctrines in a complaint to support a claim for attorney’s fees.

The motion to strike allegations seeking attorney’s fees at paragraph 29 and the Prayer for Relief at paragraph 4 is GRANTED, with 20 days’ leave to amend.

Defendant Li to give notice.

3. 30-2025-01480879 1. Case Management Conference 2. Demurrer to Cross-Complaint Schatz vs. New Life 3. Motion to Strike Answer Treatment Center, Inc 4. Motion to Strike Portions of Cross-Complaint

Plaintiff/cross-defendant Joshua Schatz (“Schatz”) demurs to the Cross-Complaint of cross- complainants New Life Treatment Center, Inc. (“NLTC”) and Maria V. Malek aka Mary Malek (“Mary” and collectively, “Cross-Complainants”). Schatz also moves to strike portions of the Cross-Complaint and the Answer filed by defendants NLTC, John Malek, and Daniel Zhuralev.

The Court notes that Joshua’s Demurrer is 24 pages long, over the page limit in the California Rules of Court. Counsel for Schatz is admonished that future filings must comply with all applicable rules and statutes.

Demurrer to Cross-Complaint

First Cause of Action for Fraud in the Inducement Schatz argues this cause of action is time-barred because the purported misrepresentations were made in August 2016 and there are no allegations as to when NLTC and Mary discovered the alleged fraud.

“In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.) “In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’” (Ibid.)

The Cross-Complaint alleges that in 2016 Schatz falsely represented that he possessed business development skills and community relationships to induce NLTC and Mary to enter into their contractual relationship. It further alleges that Schatz concealed the falsity of his representations during his engagement with NLTC and NLTC and Mary did not discover the facts constituting the fraud until 2023 when they were forced to bring someone else in to rescue the business due to Schatz’ failures in development. These allegations include facts that go beyond mere conclusions. Because a complaint must be construed liberally by drawing all reasonable inferences from the facts pleaded, and a reasonable inference from the allegations is that NLTC and Mary had no reason to believe that Schatz’ representations were false before 2023, the allegations are sufficient to invoke the delayed discovery rule.

Schatz also argues that Exhibit 2 to the Cross-Complaint, which describes what Mary said about Schatz’ statements, is inadmissible hearsay that does not fall within the excited utterance exception and the statements prove nothing about Schatz’ state of mind and whether he intending to deceive NLTC. Even if Exhibit 2 is inadmissible hearsay, the Cross-Complaint itself sufficiently alleges that Schatz intended to deceive NLTC and Mary and induce them into entering into the employment agreement. Thus, the Cross-Complaint adequately alleges the element of intent.

Schatz argues the element of reliance is not pled because NLTC and Mary do not allege that they took reasonable steps to investigate Schatz. The Cross-Complaint alleges that Mary’s reliance upon Schatz’ representations was justifiable because she had no prior knowledge that what he represented was fraudulent. Schatz contends that NLTC and Mary should have taken reasonable steps to investigate Schatz, such as performing a background check into his qualifications. This argument goes to whether Cross-Complainants can prove reliance rather than whether it is sufficiently alleged. At the pleading stage, the allegations in the Cross-Complaint are sufficient.

Lastly, Schatz argues the damage element is ambiguous because Cross-Complainants are seeking both money damages and rescission of the employment agreement. However, “modern practice allows [a] party to plead in the alternative and make inconsistent allegations.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1402.)

In light of the above, the Demurrer to the first cause of action is OVERRULED.

Second Cause of Action for Breach of Employment Agreement Schatz argues this cause of action fails because Mary’s expectations about the job tasks Schatz was to perform are not reasonably supported by the commonly accepted understanding of the Director of Operations job title and there is no covenant not to compete in the employment agreement, Schatz further argues that even if there were a covenant not to compete, it would be void under Business & Professions Code section 16600.

The employment agreement referenced as Exhibit 1 contains no covenant not to compete. Thus, Cross-Complainants’ allegations that Schatz breached an express covenant not to compete are not supported. Cross-Complainants also allege that if there was no express covenant not to compete, there was an implied covenant not to compete. “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.) Cross-Complainants have not alleged any conduct by Schatz that would support a cause of action for breach of an implied covenant not to compete.

Cross-Complainants allege that Schatz also breached the employment agreement by failing to contribute work, not adhering to agreed-upon duties, and not bringing in business. However, these allegations are not tied to any obligations imposed upon Schatz in the employment agreement reflected in Exhibit 1. Thus, the Cross-Complaint fails to adequately allege any breach of a contract.

In light of the above, the Demurrer to the second cause of action is SUSTAINED with 20 days leave to amend.

Third Cause of Action for Intentional Misrepresentation and Fourth Cause of Action for Negligent Misrepresentation Schatz argues these causes of action are also barred by the statute of limitations and there are insufficient allegations to invoke the delayed discovery rule. As discussed above, the allegations of delayed discovery are sufficient.

Schatz further argues that these causes of action are insufficiently pled.

“The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. [Citations.] The essential elements of a count for negligent misrepresentation are the same except that it does not require knowledge of falsity but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true.” (Chapman v. Skype, Inc. (2013) 220 Cal.App.4th 217, 230-231.)

The Cross-Complaint alleges that Schatz made false and misleading representations with knowledge that they were false and with the intent to cause Cross-Complainants to rely on those representations when agreeing to enter into an employment contract, Cross-Complainants reasonably relied on the falsehoods, and Cross-Complainants suffered financial harm as a result. It alternatively alleges that Schatz had no reasonable grounds for believing the representations were true when he made them. These allegations adequately allege each element of these causes of action.

Thus, the Demurrer to the third and fourth causes of action is OVERRULED.

Fifth Cause of Action for Civil Attempted Extortion and Extortion Schatz argues this cause of action should be dismissed because his statements were privileged. Schatz cites to several Penal Code statutes but provides no argument as to how any statements made by him were privileged. Thus, his argument fails and the Demurrer to the fifth cause of action is OVERRULED.

Sixth Cause of Action for Business Defamation Schatz argues this cause of action is inadequate because there are no specific defamatory statements identified and the allegations lack any evidentiary support. Further, he contends the allegations are ambiguous as to when Schatz purportedly made the defamatory statements.

The elements of a defamation claim are “(1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural tendency to injure or causes special damage.” (Wong v. Tai Jing (2010) 189 Cal.App.4th 1354, 1369.)

Cross-Complainants allege that Schatz published false information to third parties both before and after his resignation in May 2024, including referral sources, former clients, and partner

organizations. He stated falsely that NLTC provided substandard care, engaged in financial misconduct, and/or was unsafe for patients. They further allege that he made the representations with intent to harm NLTC’s business reputation and divert clients to his competing enterprise. These allegations state each element of the cause of action with sufficient facts. Schatz’ argument that the allegations lack evidentiary support is not a proper argument on a demurrer.

Schatz contends this cause of action is barred by the applicable one-year statute of limitations. The statute of limitations for defamation is one year after the cause of action accrues, i.e., when the defamatory statement is published. (Shively v. Bozanich (2003) 31 Cal.4th 1230, 1246-1247.)

The alleged false statements were made between May 2024 and May 2025. Cross-Complainants allege that at least some of the defamatory statements were made within 12 months preceding the filing of the Cross-Complaint. Because Cross-Complainants allege that defamatory statements were made within the year preceding their filing, the Demurrer based on the statute of limitations must be overruled. (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315- 1316 [“ ‘In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.’ ”].)

The Demurrer to the sixth cause of action is OVERRULED.

Seventh Cause of Action for Embezzlement Schatz argues this cause of action fails because the documents provided in Exhibit 9 do not evidence embezzlement. However, this argument is not proper on a demurrer, as it does not go to whether the Cross-Complaint adequately alleges the elements of an embezzlement cause of action and instead goes to the sufficiency of the evidence. Thus, the Demurrer to the seventh cause of action is OVERRULED.

Eighth Cause of Action for Identity Theft Schatz argues this cause of action is based on speculative allegations and there is no alleged harm that is causally linked to any of his actions.

“The elements of identity theft include: (1) that the person willfully obtain personal identifying information belonging to someone else; (2) that the person use that information for an unlawful purpose; and (3) that the person who uses the identifying information does so without the consent of the person whose personal identifying information is being used.” (People v. Sanders (2018) 22 Cal.App.5th 397, 405.)

Here, Cross-Complainants allege that Schatz used Mary’s name for his financial qualifications without her consent and authorization because her name showed up in Schatz’ background check. However, they also allege that it is unknown at this time what Schatz did with her confidential information. Further, they only vaguely allege that “damages have already been felt by Mary Malek” but allege no facts as to what those damages are. These allegations are insufficient to show that Schatz used Mary’s personal information for any unlawful purpose.

In light of the above, the Demurrer to the eighth cause of action is SUSTAINED with 20 days leave to amend.

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Motion to Strike Punitive Damages from Cross-Complaint Schatz’ Motion to Strike the prayer for punitive damages from the Cross-Complaint is DENIED, as there are fraud-based causes of action that are adequately pled. (Civil Code, § 3294(a).)

Motion to Strike Portions of Answer of NLTC, John Malek, and Daniel Zhuralev Schatz argues that certain portions of the Answer filed by NLTC, John Malek, and Daniel Zhuralev should be stricken as not in conformity with Code of Civil Procedure section 431.30, which requires the responding party to clearly admit or deny the allegations or to deny if the responding party lacks information.

Section 431.30(d) provides that a general denial is sufficient if a complaint is not verified. Section 431.30 further provides: “If the defendant has no information or belief upon the subject sufficient to enable him or her to answer an allegation of the complaint, he or she may so state in his or her answer and place his or her denial on that ground.” (Code Civ. Proc., § 431.40(e).)

The paragraphs to which Schatz objects state that Defendants neither admit nor deny certain paragraphs of the Complaint and they need more information. These paragraphs provide essentially the same information required by section 431.40(e), i.e., that Defendants have no information and belief sufficient to enable them to answer an allegation of the Complaint. Thus, the Motion to Strike portions of the Answer is DENIED. (See Code Civ. Proc., § 452 [allegations of a pleading must be liberally construed for the purpose of determining its effect].)

Moving party to give notice.

4. 30-2025-01535433 1. Case Management Conference 2. Motion to Compel Production BCAL Construction Inc. vs. LA Clinque Plaintiff BCal Construction Inc. moves for an order compelling defendant Wole Ogunlana Moliere Birthplace and (“Defendant”) to serve responses without objections to Request for Production, Set One and Woman’s Wellness, imposing monetary sanctions in the amount of $2,460.00. Inc. There is no dispute that responses to the written discovery were not timely served. Thus, objections have been waived. (Code Civ. Proc., § 2031.300(a).)

While Defendant contends that responses will be served before the hearing and relief from waiver of objections should be granted, relief may only be granted upon the Court’s determination that the party has subsequently served a response that is in substantial compliance with the Code of Civil Procedure. (Code Civ. Proc., § 2031.300(a)(1).) Relief cannot be granted based solely on the promise that substantially compliant responses will be served. Further, a separate motion for relief is required. (See id. [“The court, on motion, may relieve that party from this waiver . . .”].)

Thus, the Motion to Compel Responses without objections is GRANTED. Responses shall be served within 20 days.

The Court declines to award sanctions. Given that Defendant was acting in pro per at the time the written discovery was served, the Court finds that the imposition of sanctions would be unjust. (Code Civ. Proc., § 2031.300(c).)

Moving party to give notice.