Lacuna Sustainable Investments, LLC v. Claude Patrick McConnell

Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099 [citation and internal quotations omitted].) Legal conclusions are insufficient. (Id. at 1098–1099; Doe, 42 Cal.4th at 551, fn. 5.) The court “assume[s] the truth of the allegations in the complaint, but do[es] not assume the truth of contentions, deductions, or conclusions of law.” (California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247.)

Request for Judicial Notice

Defendant requests that the Court take judicial notice of LSI’s Operating Agreement. Plaintiffs oppose this request.

Evidence Code Section 452(h) provides that a court may take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.”

Defendant argues that the Court can take judicial notice of the Operating Agreement because it is referenced in paragraph 37 of the First Amended Complaint. Specifically, paragraph 37 alleges: “As a member and manager of LSI, McConnell owed, and continues to owe, fiduciary duties to LSI, including duties of loyalty, care, and good faith. McConnell additionally agreed to undertake fiduciary duties to LSI when he signed the LSI operating agreement.”

When ruling on a demurrer, a court can take judicial notice of a document that is referenced in the complaint. (See e.g. Performance Plastering v. Richmond American Homes (2007) 153 Cal.App.4th 659, 666, n.2; Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285, n.3, disapproved on other grounds in Leon v. County of Riverside (2023) 14 Cal.5th 910; Marina Tenants Ass’n v. Deauville Marina Dev. Co. (1986) 181 Cal.App.3d 122, 130; Salvaty v. Falcon Cable Television (1985) 165 Cal.App.3d 798, 800, n.1; Swiss Park, Inc. v.

City of Duarte (1982) 136 Cal.App.3d 755, 758.) However, the court does not take judicial notice of a document’s enforceability or its meaning where the enforceability or interpretation of the document is disputed. (See Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 115-116.) “ʽ[J]udicial notice of matters upon demurrer will be dispositive only in those instances where there is not or cannot be a factual dispute concerning that which is sought to be judicially noticed.’” (Joslin v.

H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 375 [citation omitted].) Thus, courts have taken judicial notice of both a contract and the meaning of contractual language where the contractual language is not reasonably subject to dispute. (See Scott v. JPMorgan Chase Bank, NA (2013) 214 Cal.App.4th 743, 754 [court took judicial notice of fact that under agreement,

party transferred assets but not liabilities, where interpretation of agreement was not reasonably susceptible to dispute and was capable of ready determination].)

While Plaintiffs oppose Defendant’s request for judicial notice, they do not contend that the copy of the Operating Agreement attached to Defendant’s request is not the current, operative agreement, or that it is incomplete, or that it is unenforceable in any respect. Accordingly, the Court grants Defendant’s request to take judicial notice of the Operating Agreement. However, the Court does not take judicial notice of the truth of any facts contained in the Operating Agreement or any interpretation of the agreement to the extent there is a reasonable dispute regarding the meaning of the language.

Discussion

I. All Causes of Action

A. LSI’s Ability to Sue Under the Operating Agreement

Defendant argues that LSI cannot bring an action against him because Section 5.1(c) of the Operating Agreement, which falls under the “Litigation” heading, states: “if there are two (2) or fewer Managers, approval by all Managers shall be required for the Managers to take any action.” Defendant argues that because he is one of two managers and he did not authorize this lawsuit against him, LSI does not have the authority under the Operating Agreement to bring this suit.

Plaintiffs make two arguments as to why the Court should not take judicial notice of Defendant’s proffered interpretation of the Operating Agreement, namely, that Section 5.1(c) required Defendant’s consent for LSI to bring this action against him. First, Plaintiffs attempt to create a reasonable dispute about the interpretation of the Operating Agreement by stating that they alleged something different than what Defendant contends the Operating Agreement requires. Specifically, in paragraph 13, Plaintiffs allege that “On information and belief, LSI did have the authority to maintain this suit directly.” This bare legal conclusion alone is insufficient to create a reasonable dispute, particularly where Plaintiffs fail to cite to any authority or extrinsic evidence to support this allegation.

Plaintiffs’ second argument is stronger, however. Plaintiffs argue that other language in the Operating Agreement supports their interpretation that LSI can bring an action without Defendant’s approval. Plaintiffs point to Section 5.2(g), which provides in part that the CEO (here, Plaintiff Bauer) “shall have general supervision and control of the Company’s business” and that Section 5.1 provides that “Article V sets forth provisions for the Company to be managed by the Managers subject to: (A) their delegations of authority to Officers pursuant to Section 5.2 . . . .” Plaintiffs argue that under these provisions, it is reasonable to interpret the Operating Agreement as granting Plaintiff Bauer the authority to commence this litigation on behalf of the company.

The Anmaco case relied upon by Defendant is not dispositive of this issue as Anmaco was decided under California law. Here, LSI is a Delaware LLC and the Operating Agreement states it is governed by Delaware law. The Anmaco court acknowledged that cases from other states

are “inconsistent in their results”. (Anmaco, Inc. v. Bohlken (1993) 13 Cal.App.4th 891, 898- 899.) Further, in Anmaco, the operating agreement contained language that would have also given the defendant, the CEO, the ability to sue the plaintiff. The court stated: “Pressing the corporation into litigation as a plaintiff is inappropriate where the other shareholder-director could claim equal authority to bring suit in the corporate name. This is particularly obvious in the instant case where [the defendant] is not only an equal director and shareholder, but is also chief executive officer of the company.” (Id. at p. 900.) Here, Defendant does not point to any language in the Operating Agreement that gave him the same powers as Plaintiff Bauer, the CEO of LSI.1 Defendant also cites to Delaware Code Section 18-402, but this section does not address the specific issue before the Court.

The Court does not sustain the demurrer based on the language of the Operating Agreement as Plaintiffs have offered a reasonable, contrary interpretation of the Operating Agreement that could potentially support their argument that LSI can bring this action against Defendant. The Court will not determine this issue as a matter of law at this stage of the litigation.

B. Uncertainty

Defendant argues that the First Amended Complaint is uncertain because it asserts alternative claims by LSI directly and by Plaintiff Bauer derivatively on behalf of LSI.

“Demurrers for uncertainty under Code of Civil Procedure section 430.10, subdivision (e) are disfavored. 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. A demurrer for uncertainty should be overruled when the facts as to which the complaint is uncertain are presumptively within the defendant’s knowledge.” (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822 [citations and internal quotations omitted].)

The Court does not sustain the demurrer on this basis. Pleading in the alternative is a generally acceptable practice and Defendant has not shown that the claims are so ambiguous that he cannot meaningfully respond. The other “ambiguities” offered by Defendant pertain to facts that Defendant argues must be alleged but which are not actually required to be alleged to state a cause of action, as discussed more fully below.

II. First Cause of Action

Defendant demurs to the First Cause of Action for breach of fiduciary duty on the additional ground that Plaintiffs fail to allege sufficient facts that Defendant’s payment to himself from LSI’s account was unauthorized or constituted self-dealing. Defendant points out that Plaintiffs allege that Defendant was a member, manager, and President of LSI and do not identify any provision of the Operating Agreement or other governing document that prohibited Defendant 1 Defendant states on page 18 of his MPA that he is also a CEO, but this is not alleged in the First Amended Complaint. Defendant also argues that California courts “routinely” apply Anmaco to foreign entities, and “routinely” sustain demurs to actions filed in the name of deadlocked entities even if formed elsewhere but does not cite to any cases that have actually done so.

from making this payment. Further, Defendant argues, Plaintiffs do not allege any facts showing the payment did not reflect compensation due or a distribution to which Defendant was entitled, and do not allege that LSI requested or demanded the return of the payment which was made almost three years before filing this suit. Defendant also contends that Plaintiffs’ other allegations regarding Defendant’s failure to continue working for LSI and Defendant’s conduct relating to litigation against LSI are vague and conclusory because Plaintiffs do not identify the specific litigation, the parties involved, the nature of Defendant’s assistance, or whether Defendant’s assistance was required under law.

The demurrer to the First Cause of Action is overruled. Plaintiffs have alleged sufficient facts to state a cause of action for breach of fiduciary duty. They do not need to allege the additional facts identified by Defendant in order to state a cause of action. Defendant’s additional argument that this cause of action is barred by the economic loss rule also fails as Defendant does not show that Plaintiff’s claims are based solely on duties arising out of the Operating Agreement. Further, Defendant’s economic loss rule argument challenges only the alleged unauthorized payment and not the other conduct at issue in this cause of action, and a demurrer does not lie to only part of a cause of action. (See Cornejo v. Lightbourne (2013) 220 Cal.App.4th 932, 944.)

III. Second Cause of Action

Defendant demurs to the Second Cause of Action on the additional ground that Plaintiffs fail to allege sufficient facts to state a cause of action for conversion. Defendant argues that Plaintiffs do not allege Defendant lacked the right to access or schedule the payment to himself or that the payment was not compensation due or a distribution. The demurrer is overruled. Plaintiffs have alleged sufficient facts to state a cause of action for conversion as they specifically allege that the payment was wrongful and unauthorized. Plaintiffs do not need to allege the additional facts identified by Defendant in order to state a cause of action. Defendant also fails to show how this cause of action is barred by the economic loss rule.

IV. Third Cause of Action

Defendant demurs to the Third Cause of Action for violation of Penal Code Section 502 on the additional ground that the allegation that Defendant did not have authority to make the payment is not supported by factual allegations. Specifically, Defendant argues that Plaintiffs do not allege Defendant’s access to the payment system was revoked or limited before the payment was made, that Defendant exceeded the scope of his access, or that Defendant was not owed the money or entitled to the payment. Defendant also argues that Plaintiffs’ allegation that Defendant did not have permission to make the payment is a legal conclusion only.

The demurrer to this cause of action is overruled. Plaintiffs allege that Defendant used the payment system without permission to devise or execute a scheme or artifice to defraud, deceive or extort LSI, or to wrongfully obtain LSI’s money. Plaintiffs also allege that Defendant’s use of the payroll software was without authorization and that despite Defendant’s role as President, he did not have the authority to make withdrawals for improper purposes that were not authorized by LSI. These allegations are sufficient to state a cause of action.

All parties must comply with Marin County Superior Court Local Rules, Rule 2.10(B) to contest the tentative decision. Parties who request oral argument are required to appear in person or remotely by ZOOM. Regardless of whether a party requests oral argument in accordance with Rule 2.10(B), the prevailing party shall prepare an order consistent with the announced ruling as required by Marin County Superior Court Local Rules, Rule 2.11.

The Zoom appearance information for June, 2026 is as follows: https://marin-courts-ca-gov.zoomgov.com/j/1605267272?pwd=908CbP6TV2mhCAyai1nzo6lyz2dKaw.1

Meeting ID: 160 526 7272 Passcode: 026935

If you are unable to join by video, you may join by telephone by calling (669) 254-5252 and using the above-provided passcode. Zoom appearance information may also be found on the Court’s website: https://www.marin.courts.ca.gov