Delmorgan Group, LLC, et al. v. Phoenix Capital Group Holdings, LLC, et al.

(Santa Monica Courthouse: Dept. P) August 18, 2026 DEPARTMENT P LAW AND MOTION RULINGS

Delmorgan Group, LLC, et al. v. Phoenix Capital Group Holdings, LLC, et al., Case No. 25SMCV00146 Hearing date August 18, 2026 Plaintiff/Cross-Defendants Delmorgan Group, LLC and Globalist Capital, LLC's Demurrer with Motion to Strike the First Amended Cross-Complaint Background On January 10, 2025, Plaintiffs Delmorgan Group, LLC ("DMG") and Globalist Capital, LLC ("GCL") (collectively, "Plaintiffs") commenced this action.

On August 27, 2025, Plaintiffs filed the operative First Amended Complaint ("FAC") against Defendants Phoenix Capital Group Holdings, LLC; Phoenix Operating LLC; and DOES 1 through 10 (collectively, "Defendants"), alleging a sole cause of action for Breach of Written Contract.

On March 9, 2026, Defendants Phoenix Capital Group Holdings, LLC and Phoenix Operating LLC filed an Answer to the FAC.

On April 29, 2026, Defendants Phoenix Capital Group Holdings, LLC and Phoenix Operating LLC, and Phoenix Energy One, LLC (jointly, "Phoenix") filed the operative First Amended Cross-Complaint ("FACC") against Plaintiffs, alleging causes of action for: (1) Fraudulent Inducement; (2) Breach of Contract; (3) Declaratory Relief; and (4) Rescission and Restitution.

On June 2, 2026, Plaintiffs/Cross-Defendants' filed the instant Demurrer with Motion to Strike the FACC.

On August 5, 2026, Phoenix filed an Opposition.

On August 11, 2026, Plaintiffs/Cross-Defendants' filed a Reply.

Meet and Confer Prior to filing a demurrer and motion to strike, the demurring/moving party is required to meet and confer in person, by telephone, or by videoconference with the party who filed the pleading for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer and motion to strike. (Code Civ. Proc., Sec. 430.41; Code Civ. Proc., Sec. 435.5.)¿¿ Here, Plaintiffs/Cross-Defendants' counsel of record, Susan M. Freedman, avers that he and Phoenix's counsel of record, Patrick M. Connolly, esq., met and conferred telephonically on May 7, 2026 at 2:00 p.m. to discuss the issues now raised in the demurrer and motion to strike. (Freedman Decl., P.4, Ex. 2.)

The parties were unable to resolve the issues informally. (Id., P.5, Ex. 3.)

Thus, the Court finds that Plaintiffs/Cross-Defendants fulfilled their meet and confer obligations.

Legal Standard

Demurrer "The primary function of a pleading is to give the other party notice so that it may prepare its case [citation], and a defect in a pleading that otherwise properly notifies a party cannot be said to affect substantial rights." (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.)¿ "A¿demurrer¿tests the legal sufficiency of the factual allegations in a complaint." (Ivanoff v. Bank of America, N.A.¿ (2017) 9 Cal.App.5th 719, 725.)

The Court looks to whether "the complaint alleges facts sufficient to state a cause of action or discloses a complete defense." (Id.)

The Court does not "read passages from a complaint in isolation; in reviewing a ruling on a demurrer, we read the complaint 'as a whole and its parts in their context.' [Citation.]" (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 804.)

The Court "assume[s] the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken." (Harris, supra, 56 Cal.4th p. 240.)

"The court does not, however, assume the truth of contentions, deductions, or conclusions of law. [Citation.]" (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.)

A general demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted or under section 430.10, subdivision (a), where the court has no jurisdiction of the subject of the cause of action alleged in the pleading.

All other grounds listed in Section 430.10, including uncertainty under subdivision (f), are special demurrers.

Special demurrers are not allowed in limited jurisdiction courts. (Code Civ. Proc., Sec. 92, subd. (c).)

A demurrer for uncertainty means the pleading is ambiguous or unintelligible. (Code Civ. Proc., Sec. 430.10, subd. (f).)

"A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures." (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

"D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond." (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)

The burden is on the complainant to show the Court that a pleading can be amended successfully. (Id.)

Motion to Strike "Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof, but this time limitation shall not apply to motions specified in subdivision (e)." (Code Civ. Proc., Sec. 435, subd. (b)(1).)¿¿ "The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading." (Code Civ. Proc., Sec. 436, subd. (a); see also Stafford v. Shultz (1954) 42 Cal.2d 767, 782 ["Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded".].)¿

The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court. (Code Civ. Proc., Sec. 436, subd. (b).)

An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; is neither pertinent to nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., Sec. 431.10, subd. (b).)

The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., Sec. 437.)¿¿

Analysis Plaintiffs/Cross-Defendants (hereinafter, "Plaintiffs") demur to the first cause of action asserted against them in the FACC on the grounds that Phoenix fails to allege fraudulent inducement with the requisite particularity.

Fraudulent Inducement "The elements of fraud," including a cause of action for fraudulent inducement, "are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage." (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)

The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of "liberal construction" of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false 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 Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

This requirement can be satisfied by attaching exhibits to the complaint that alongside the specific allegations, contain information directly addressing the who, what, when, where, and how. (See e.g., West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

The FACC, alleges, inter alia, that DMG falsified, exaggerated, and misrepresented its reputation, size, experience, composition, and type and volume of completed transactions to induce potential clients, including Phoenix to engage in business with DMG. (FACC, P.P.1, 11, 13, Ex. A - DelMorgan Engagement Summary, 6/2022.)

Based upon and in reliance on DMG's misrepresentations, on August 10, 2022, Phoenix entered into the Letter Agreement with DMG, wherein DMG "was retained by Phoenix to act as Phoenix's transaction advisor and to introduce Phoenix to third parties that could be counterparties to Phoenix in a specifically defined 'Transaction,' which included (i) a private placement by Phoenix; (ii) the sale of Phoenix to an investor; (iii) an acquisition of a company by Phoenix whether via merger, consolidation, or other business combination; (iv) a sale of a portion of Phoenix, whether by merger, stock sale, or sale; (v) a recapitalization involving the issuance of any indebtedness or equity securities; or (vi) an alliance to enter a joint venture, or a sales, marketing, and/or management agreement." (Id., P.P.2, 14.)

DMG failed to procure an acceptable "Transaction" for Phoenix during the term of the Letter Agreement. (Id., P.3.)

DMG made scattershot cold-calls and sent out unsolicited, unwanted, and untargeted emails to financial institutions and investors without regard to the "fit" with Phoenix's objectives, the transaction sought, or the nature of Phoenix's business at the time. (Id.)

DMG knew these representations were false and deceptive when made. (Id., P.12.)

Phoenix would not have retained DMG but for these representations, which Phoenix only recently discovered to be false. (Id., P.14.)

Phoenix has and continues to incur damages as a direct and proximate result of DMG's misrepresentations.

The Court agrees with Plaintiffs that the FAC does not allege a claim for fraudulent inducement with the required specificity.

Instead, the FAC merely alleges in a conclusory manner that DMG misrepresented its reputation, size, experience, composition, and type and volume of transactions DMG completed as a "global investment bank" and "strategic transaction advisor" and misrepresented that various individuals were employed at DMG when in fact they were not.

There are no allegations, however, as to exactly which specific representations were false.

Worse, the FAC alleges that misrepresentations were made through the public website and in solicitation materials, as well as in other oral and written communications with clients, but the FAC contains no details regarding these other oral and written communications.

Accordingly, the demurrer to the first cause of action for fraudulent inducement is sustained with leave to amend.

Motion to Strike Punitive Damages Plaintiffs also move to strike the entirety of paragraph 16 and paragraph E of the FACC, which reference punitive damages as to the first cause of action for fraudulent inducement. (FACC, P.16 at 6:15-17; P.E at 9:25-26.)

As discussed above, Phoenix fails to allege sufficient facts to support the first cause of action for fraud.

As such, the basis to strike Phoenix's claim for punitive damages is rendered moot by the demurrer ruling.

Conclusion

Based on the foregoing, Plaintiffs Delmorgan Group, LLC and Globalist Capital, LLC's Demurrer to the First Amended Cross-Complaint is SUSTAINED with 30 days leave to amend as to the first cause of action for Fraudulent Inducement.

Plaintiffs Delmorgan Group, LLC and Globalist Capital, LLC's Motion to Strike the First Amended Cross-Complaint is DENIED as moot.

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