YOSEF ZAGHI VS. EVOLVE MANAGEMENT EXPERTS, LLC ET AL

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demurrer stage: the truth of a document's contents will not be considered unless it is a judgment, statement of decision, or order [citations]; the truth of statements may be accepted when made by a party but not those of third parties or an opponent [citations]; and the contents of a document may only be accepted ‘ “ ‘where there is not or cannot be a factual dispute concerning that which is sought to be judicially noticed.’ ” ’ ” (C.R. v. Tenant Healthcare Corp., at p. 1103, 87 Cal.Rptr.3d 424.)

Genis v. Schainbaum (2021) 66 Cal.App.5th 1007, 1011 [281 Cal.Rptr.3d 484, 487]. Although the existence of a document may be judicially noticeable, the truth of statements contained in the document and its proper interpretation are not subject to judicial notice if those matters are reasonably disputable. (StorMedia, Inc. v. Superior Court (1999) 20 Cal.4th 449, 457, fn. 9, 84 Cal.Rptr.2d 843, 976 P.2d 214.) StorMedia stated: “In ruling on a demurrer, a court may consider facts of which it has taken judicial notice. (Code Civ.

Proc., § 430.30, subd. (a).) This includes the existence of a document. When judicial notice is taken of a document, however, the truthfulness and proper interpretation of the document are disputable. (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374 [228 Cal.Rptr. 878].)” (Ibid.) Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113 [55 Cal.Rptr.3d 621, 633]. While the first and second requests made by Defendants fall within the purview of Section 452, matters which may be judicially noticed, the Court does find that Defendants provided Plaintiff and the Court sufficient notice of the request and copies of the documents requested to be noticed.

As such, Defendants have satisfied the requirements of Evidence Code § 453 and the request for judicial notice is granted. As Plaintiff also requests judicial notice of the Agreement attached to Plaintiff’s original Complaint which is the same as attached to Defendant’s Request for judicial Notice, the Court grants the requests to take judicial notice of the Agreement for the limited purpose of establishing the existence and terms of the Agreement as referenced in the pleadings. Meet and Confer Requirement Code of Civil Procedure §430.41(a) provides: Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.

Code of Civil Procedure §430.41(a)(3): The demurring party shall file and serve with the demurrer a declaration stating either of the following:

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(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer. (B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith. Dumas v. Los Angeles County Bd. of Supervisors (2020) 45 Cal. App. 5th 348 (“If, upon review of a declaration under section 430.41, subdivision (a)(3), a court learns no meet and confer has taken place, or concludes further conferences between counsel would likely be productive, it retains discretion to order counsel to meaningfully discuss the pleadings with an eye toward reducing the number of issues or eliminating the need for a demurrer, and to continue the hearing date to facilitate that effort”).

Based on the Declaration of Katy M. Young, counsel attempted to meet and confer with Plaintiff prior to filing, but the dispute could not be resolved.

Background

Plaintiff filed the FAC on December 2, 2025, alleging causes of action for 1) Intentional Misrepresentation; 2) Breach of Contract; 3) Unfair Competition (Bus. & Prof. Code § 17200); and 4) Breach of Implied Warranty of Fair Dealing. On May 16, 2026, Defendant Adler filed a voluntary petition under chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of California, Case No. 2:26-bk-22822. A Notice of Stay of Proceedings was filed by Defendant Adler on May 22, 2026.

Legal Principles [A] demurrer challenges only the legal sufficiency of the complaint, not the truth or the accuracy of its factual allegations or the plaintiff’s ability to prove those allegations.” (Amarel v. Connell (1998) 202 Cal.App.3d 137, 140.) A demurrer is directed at the face of the complaint and to matters subject to judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) All properly pleaded allegations of fact in the complaint are accepted as true, however improbable they may be, but not the contentions, deductions or conclusions of facts or law. (Blank v.

Kirwan (1985) 39 Cal.3d gives “the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank, supra, 39 Cal.3d at p. 318.) // // //

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Discussion Defendants demurrer to all causes of action pursuant to Code of Civil Procedure § 430.10(e), as the FAC does not state facts sufficient to constitute a cause of action.

1. Automatic Stay Plaintiff argues that as Defendant Adler has filed for bankruptcy and a stay is in place, the Court should take the demurrer off calendar as to Defendant Adler and hear and decide it as to Defendant Evolve only. Upon filing of a voluntary bankruptcy petition, 11 U.S.C. § 362(a)(1) operates as a stay, applicable to all entities, of the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case.

Significantly, “the automatic stay of judicial proceedings against a debtor in bankruptcy does not apply to nondebtor codefendants.” (Cross v. Cooper (2011) 197 Cal.App.4th 357, 365, fn. 2, 127 Cal.Rptr.3d 903 (Cross); accord, Danko v. O'Reilly (2014) 232 Cal.App.4th 732, 748, 181 Cal.Rptr.3d 304 (Danko) [“ ‘automatic stay does not ... apply to nondebtor entities such as ... codefendants’ ”].) As a general rule, therefore, because “the automatic stay protects only the debtor,” the “[b]ankruptcy of one defendant in a multidefendant case does not stay the case as to the remaining defendants.” (March et al., Cal.

Practice Guide: Bankruptcy (The Rutter Group 2016) ¶ 8:100, p. 8(I)-8, ¶ 8:125, p. 8(I)-11 [citing federal authorities].) Higgins v. Superior Court (2017) 15 Cal.App.5th 973, 979–980 [224 Cal.Rptr.3d 11, 16], as modified (Sept. 28, 2017). As there is a stay in place, the demurrer is taken off calendar as to Defendant Adler.

2. First Cause of Action – Intentional Misrepresentation Defendants argue that the FAC does not contain the required specificity, as it does not provide specifications as to how the representation was made, in what context and via what method. Plaintiff argues the specificity requirement is met. The well-established common law elements of fraud which give rise to the tort action for deceit are: (1) misrepresentation of a material fact (consisting of false representation, concealment or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to deceive and induce reliance; (4) justifiable reliance on the misrepresentation; and (5) resulting damage.

City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 481 [80 Cal.Rptr.2d 329, 354], as modified on denial of reh'g (Jan. 6, 1999). In California, fraud must be pled specifically; general and conclusory allegations do not suffice. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 74, 269 Cal.Rptr. 337; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268, 258 Cal.Rptr. 787; 5 Witkin, Cal.Procedure (3d ed. 1985) Pleading, § 662, pp. 111–112.) “Thus ‘ “the policy of liberal construction of the pleadings ... will

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not ordinarily be invoked to sustain a pleading defective in any material respect.’ ” [Citation.] [¶] This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Stansfield, supra, 220 Cal.App.3d at p. 73, 269 Cal.Rptr. 337, italics in original.) A plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must “allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v.

State Farm Mutual Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157, 2 Cal.Rptr.2d 861.) Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [49 Cal.Rptr.2d 377, 385, 909 P.2d 981, 989] (emphasis added). The Court finds the FAC alleges the elements for intentional misrepresentation with the required specificity. Defendants further argue that Plaintiff’s allegation that Defendant Evolve’s services would be different and improved from those of ExecTech are superlatives that do not qualify as misrepresentations.

Plaintiff argues that Defendant Evolve’s materials were nearly identical copies, which is not a matter of taste and is accordingly actionable. “[A]dvertising which merely states in general terms that one product is superior is not actionable.” Smith–Victor, 242 F.Supp. at 308. “However, misdescriptions of specific or absolute characteristics of a product are actionable.” Stiffel, 658 F.Supp. at 1115. Cook, Perkiss and Liehe, Inc. v. Northern California Collection Service Inc. (9th Cir. 1990) 911 F.2d 242, 246.

The FAC alleges that Defendant Evolve’s services would be different and improved from those of ExecTech but much of Defendant Evolve’s materials were nearly identical copies of ExecTech materials. The Court finds that such specific allegations are actionable. Lastly, Defendants argue that Plaintiff will never be able to provide this representation was false because whether Defendant Evolve’s services were an improvement over ExecTech’s is subjective. Plaintiffs argue that Defendants’ subjectivity argument presents a factual issue that cannot be resolved on demurrer.

The Court finds that Defendants’ subjectivity argument is a question of fact that is not properly resolved on demurrer. The Court overrules Defendants’ demurrer as to the First Cause of Action.

3. Second Cause of Action – Breach of Contract Defendants argue that Plaintiff’s allegation that “several of the essential services Evolve promised and contracted for were either not provided at all, or were provided in such a minimal manner as to make them essentially worthless” also fails because the Agreement provides no

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guarantee of any particular services, as it used verbiage such as that Defendant Evolve “agrees to provide to Client a consulting program that may include, but is not limited to...” Plaintiff contends that Defendants conceded that the Agreement obligated Defendant Evolve to provide “a consulting program” and the “may include” language identifies potential subject areas within the program. Whether what it delivered was a consulting program at all, or was instead so minimal as to be worthless, is a question of fact.

The elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff. Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821 [124 Cal.Rptr.3d 256, 263, 250 P.3d 1115, 1121]. Section 1 of the Agreement provides (emphasis added): 1. Management Consulting Program. Evolve agrees to provide to Client a consulting program that may include, but is not limited to: marketing, motivation systems for client and client's staff, methods of increasing existing production, procedures to increase staff responsibilities, advice on duties, goal setting, planning, plan execution, financial management, and problem solving to increase client profitability and freedom from time restraints.

Additional topics to address and services to be provided by Evolve are outlined in Attachment "Evolve Proposal" which by reference is made a part of this Agreement. Under the terms of the Agreement, Defendant Evolve agreed to provide Plaintiff a consulting program. The "may include" language identifies potential service areas within that program; it does not eliminate the core contractual obligation to actually deliver a consulting program of some meaningful substance. Plaintiff has alleged that several of the services Defendant Evolve promised and contracted for were either not provided at all, or were provided in such a minimal manner as to make them essentially worthless.

Whether what Defendant Evolve delivered constituted a consulting program at all — or was instead so minimal as to be worthless — is a question of fact that cannot be resolved on demurrer. Defendants’ demurrer as to the Second Cause of Action is overruled.

4. Third Cause of Action – Unfair Competition Defendants argue that because Plaintiff has not sufficiently alleged causes of action for fraud or breach of contract, the UCL claim fails because it explicitly incorporates and relies upon these allegations. Plaintiff argues that not only are the first and second causes of action adequately pleaded to support the UCL claim, but it is also independently sufficient.

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As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code. Bus. & Prof. Code, § 17200. Where a complaint alleges conduct that is fraudulent, unlawful, and unfair, and the UCL cause of action incorporates the allegations of all other causes of action, the court must read the complaint as a whole and its parts in their context. Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1386 [108 Cal.Rptr.3d 669, 679]. The Court finds that the FAC sufficiently alleged facts for an unfair competition cause of action. Defendants’ demurrer as to the Third Cause of Action is overruled.

5. Fourth Cause of Action – Breach of Implied Warranty of Fair Dealing (Implied Covenant of Good Faith and Fair Dealing) Defendants argue that Plaintiff’s allegations that Defendants breached the implied convent of good faith and fair dealing by “providing materials that were stolen from another company and failing to provide services that were pre-paid for” fails because the Agreement does not prohibit Defendants from using materials from another company and does not dictate exactly what services Defendant Evolve would provide.

Defendants further argue that Plaintiff’s allegation that Defendants failed to provide the services he paid for is also insufficient to sustain his claim for breach of the implied covenant of good faith and fair dealing because it is identical to the allegation supporting his breach of contract claim. Plaintiff argues that although the cause of action is labeled as a breach of the implied warranty of fair dealing, the allegations are sufficient to support a claim for breach of the implied covenant of good faith and fair dealing.

Plaintiff argues that Defendants cannot claim unfettered discretion regarding the content of the program while simultaneously denying that the covenant governs its exercise. Further, Plaintiff does not seek to impose duties beyond the Agreement, as he alleged that Defendant exercised the discretion the Agreement gave it in a manner that defeated the purpose for which he paid. Lastly, the FAC includes allegations that go beyond the breach of contract claim, as it includes a refusal to cooperate and interference with performance. “ ‘Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.’ (Rest.2d Contracts, § 205.)

Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371 [6 Cal.Rptr.2d 467, 483, 826 P.2d 710, 726]. The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith. (See, Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 923, 216

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Cal.Rptr. 345, 702 P.2d 503; California Lettuce Growers Assn. v. Union Sugar Co. (1955) 45 Cal.2d 474, 484, 289 P.2d 785.). Id. at 372. A party violates the covenant if it subjectively lacks belief in the validity of its act or if its conduct is objectively unreasonable. (Comment, Reconstructing Breach of the Implied Covenant of Good Faith and Fair Dealing as a Tort (1985) 73 Cal.L.Rev. 1291, 1303; Farnsworth, Good Faith Performance and Commercial Reasonableness Under the Uniform Commercial Code (1962–1963) 30 U.Chi.L.Rev. 666.)

In the case of a discretionary power, it has been suggested the covenant requires the party holding such power to exercise it “for any purpose within the reasonable contemplation of the parties at the time of formation—to capture opportunities that were preserved upon entering the contract, interpreted objectively.” (Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith (1980) 94 Harv.L.Rev. at p. 373, fn. omitted.). Id. Breach of a specific provision of the contract is not a necessary prerequisite.

Id. at 373. 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 [272 Cal.Rptr. 387, 400] The Court finds that the facts alleged do not independently constitute a cause of action for Breach of Implied Covenant of Good Faith and Fair Dealing, as they are substantially the same conduct as described in the Breach of Contract cause of action.

Defendants’ demurrer as to the Fourth Cause of Action is sustained with leave to amend.

6. Alter Ego Liability Defendants argue that all causes of action against Defendant Adler should be dismissed because Plaintiff has failed to adequately allege either unity of interest or an inequitable result. As the Court has taken the demurrer off calendar as to Defendant Adler due to the stay in place, the Court does not address Defendants’ argument. TENTATIVE RULING #4: THE DEMURRER IS TAKEN OFF CALENDAR AS TO DEFENDANT ADLER WITHOUT PREJUDICE TO ITS RENEWAL AFTER THE AUTOMATIC STAY TERMINATES OR IS ANNULLED.

DEENDANTS’ DEMURRER AS TO DEFENDANT EVOLVE IS OVERRULED AS TO THE FIRST, SECOND, AND THIRD CAUSES OF ACTION. DEFENDANTS’ DEMURRER AS TO DEFENDANT EVOLVE IS SUSTAINED WITH LEAVE TO AMEND AS TO THE FOURTH CAUSE OF ACTION. NO HEARING ON THIS MATTER WILL BE HELD UNLESS A REQUEST FOR ORAL ARGUMENT IS TRANSMITTED ELECTRONICALLY THROUGH THE COURT’S WEBSITE OR BY TELEPHONE TO THE COURT AT (530) 621-6551 BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. CAL.

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RULE CT. 3.1308; LOCAL RULE 8.05.07; SEE ALSO LEWIS V. SUPERIOR COURT, 19 CAL.4TH 1232, 1247 (1999). NOTICE TO ALL PARTIES OF A REQUEST FOR ORAL ARGUMENT AND THE GROUNDS UPON WHICH ARGUMENT IS BEING REQUESTED MUST BE MADE BY TELEPHONE OR IN PERSON BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. CAL. RULE CT. 3.1308; EL DORADO COUNTY LOCAL RULE 8.05.07. PROOF OF SERVICE OF SAID NOTICE MUST BE FILED PRIOR TO OR AT THE HEARING. LONG CAUSE HEARINGS MUST BE REQUESTED BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED AND THE PARTIES ARE TO PROVIDE THE COURT WITH THREE MUTUALLY AGREEABLE DATES ON FRIDAY AFTERNOONS AT 2:30 P.M.

LONG CAUSE ORAL ARGUMENT REQUESTS WILL BE SET FOR HEARING ON ONE OF THE THREE MUTUALLY AGREEABLE DATES ON FRIDAY AFTERNOONS AT 2:30 P.M. THE COURT WILL ADVISE THE PARTIES OF THE LONG CAUSE HEARING DATE AND TIME BY 5:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. PARTIES MAY PERSONALLY APPEAR AT THE HEARING.

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