Jun Lu v. Rozita Dadgostari

2 Dadgostari also initially demurred to Lu’s complaint on the grounds of another action pending, but Dadgostari filed an amended demurrer on March 18, 2026 withdrawing this argument. 3 The court notes that Dadgostari appears to have withdrawn her request for judicial notice as part of filing an amended demurrer on March 18, 2026. To the extent Dadgostari did not intend to withdraw this request, the court grants judicial notice, as discussed. 13

The Court GRANTS judicial notice of Exhibits 1 and 2 to Lu’s request for judicial notice. (Evid. Code, ¶ 452, subd. (d); Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 525 [“The trial court properly took judicial notice of the arbitration award.”].) The Court takes judicial notice of the existence of these exhibits but does not take notice of the truth of any disputed contents of these exhibits. (Oh, supra, 53 Cal.App.5th at pp. 80-81.)

The Court SUSTAINS Dadgostari’s demurrer to the complaint’s first cause of action with 10 days’ leave to amend. “The well-known elements of a cause of action for fraud are: (1) a misrepresentation, which includes a concealment or nondisclosure; (2) knowledge of the falsity of the misrepresentation, i.e., scienter; (3) intent to induce reliance on the misrepresentation; (4) justifiable reliance; and (5) resulting damages.” (Cadlo v. Owens- Illinois, Inc. (2004) 125 Cal.App.4th 513, 519, citing Small v.

Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173.) As a general rule, each element in a fraud cause of action must be pled with specificity. (Ibid.) This particularity requirement “necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 (Lazar), emphasis original, internal citation and quotation marks omitted.)

The Court will first address Dadgostari’s damages argument. The Court agrees with Dadgostari that the allegations in paragraph 54 of the complaint appear to allege damages suffered by SEF, rather than Lu, and that these damages are derivative in nature. (Complaint, ¶ 54 [“Plaintiff was damaged by Defendant’s conduct, which allowed Defendant to prematurely insert herself in Plaintiff’s place, gain access to SEF’s finances, misappropriate $45,000 from SEF’s funds in a purported effort to pay the remaining balance of $57,618 due under the Purchase Agreement, and engage in conduct intended to devalue SEF . . .”]; Sirott v.

Superior Court (2022) 78 Cal.App.5th 371, 381 [“Under these principles, a corporation’s shareholders have no direct cause of action or right of recovery against those who have harmed [the corporation], but they can bring a derivative suit to enforce the corporation’s rights . . .”], internal citation and quotation marks omitted.)

However, Lu argues that complaint also sufficiently alleges other forms of damage that Lu suffered directly. (Opposition to Demurrer (“Opposition”), pp. 4:23-5:12.) Dadgostari, in turn, argues that these damages are speculative and insufficiently pled. (Memorandum of Points and Authorities in Support of Demurrer (“MPA”), p. 6:1-16.) The Court disagrees. A complaint’s “failure to ascribe a dollar amount to . . . elements of damage [is] not fatal to [a] pleading.” (Furia v. Helm (2003) 111 Cal.App.4th 945, 956 (Furia).)

As such, the complaint does not need to identify a specific dollar amount of damages, as Dadgostari seems to suggest. (MPA, p. 6:15-16.) Moreover, the Court of Appeal in Furia found sufficient the allegation that a plaintiff “was put to the expense of defending the charge of abandonment” because this allegation described “in a meaningful way the manner in which [the plaintiff] was damaged by his reliance on [the defendant’s] advice.” (Id. at pp. 956-957.) Here, the complaint alleges that Dadgostari’s conduct “deprived Plaintiff of opportunities to work with other potential buyers while the Purchase Agreement remained in force” and Lu “was induced to sign the purchase agreement and subsequently refrain from immediate enforcement of Defendant’s outstanding payment obligations or immediately demanding termination.” (Complaint, ¶¶ 53, 55.)

These allegations describe “the manner in which” Lu was damaged by Dadgostari’s alleged fraudulent conduct. Whether or not Lu can substantiate these damages is beyond the reach of a demurrer. 14

The Court also disagrees with Dadgostari that the complaint does not sufficiently allege knowledge of falsity. (MPA, p. 5:26-27.) False “representations made recklessly and without regard for their truth in order to induce action by another are the equivalent of misrepresentations knowingly and intentionally uttered.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974, internal citation and quotation marks omitted.) With this in mind, the Court notes that the complaint alleges that Dadgostari made intentional misrepresentations “recklessly with the intent for Plaintiff to rely upon” them. (Complaint, ¶ 52.) This allegation is sufficient.

But the Court is persuaded by Dadgostari’s remaining argument. The Court agrees with Dadgostari that the allegations underlying the complaint’s first cause of action do not meet the heightened pleading standard necessary to sufficiently allege fraud. The complaint alleges that Dadgostari “made numerous misrepresentations of material fact regarding her intent and ability to pay the $500,000 due under the terms of the Purchase Agreement.” (Complaint, ¶ 50.) This allegation does not allege the “when, where, to whom, and by what means” any alleged misrepresentations were made. (Lazar, supra, 12 Cal.4th at p. 645.)

The complaint’s allegation that “Defendant also misrepresented the fact that she would perform her obligation under the Purchase Agreement to pay the remaining balance of $57,618 due under the Purchase Agreement” is similarly insufficient. (Complaint, ¶ 51.) In opposition, Lu argues that the complaint’s first cause of action incorporates allegations in the complaint’s seventeenth, twenty-first, and twenty-fourth paragraphs. (Opposition, pp. 3:26-4:2, citing Complaint, ¶¶ 17, 21, 24.) These allegations are insufficient for various reasons—the complaint’s seventeenth paragraph does not provide when any alleged misrepresentation occurred, where such a misrepresentation occurred, and by what means such a misrepresentation occurred; the twenty-first and twenty-fourth paragraphs similarly do not allege where or by what means any specific misrepresentation occurred.

The Court OVERRULES Dadgostari’s demurrer to the complaint’s second cause of action. “Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240, internal citation and quotation marks omitted.) Dadgostari argues that a party cannot bring a conversion claim on the basis “that the value of their stock in a corporation dropped.

This is because property of a corporation is separate from the property of the shareholder, who holds interest in the company’s stock, not its separate personal property or cash.” (MPA, pp. 6:20-7:7, citing Corp. Code § 17300.) The Court is not persuaded by this argument. In Holistic Supplements, LLC v. Stark (2021) 61 Cal.App.5th 530 (Holistic), the Court of Appeal held that the “gravamen” of the plaintiff’s claims was the “injury inflicted when [d]efendants willfully took [her] membership interest” in the co-plaintiff limited liability company and the plaintiff’s “membership interest in the LLC was personal property belonging to her as an individual. . . .

As personal property, [the plaintiff’s] membership interest could be subject to individual claims based on theft of that interest. An apt analogy is to the law of corporate stock. California law treats corporate stock as personal property, and an individual shareholder may bring personal claims for conversion based on theft of that stock. . . . [The plaintiff’s] claim of conversion of her personal property membership interest in the LLC is no different. . . . [The plaintiff’s] claims look nothing like the derivative claims . . . [t]hey are not based on any alleged diminution of the value of the LLC’s assets. . . .

Instead, [the plaintiff] claims [the 15

defendant’s] actions in reorganizing the LLC and naming himself as sole shareholder amounted to theft of her personal property membership interest in the LLC.” (Holistic, supra, 61 Cal.App.5th at pp. 542-543, internal citations and quotation marks omitted.) Here, similar to the plaintiff’s allegations in Holistic, the complaint alleges that Dadgostari “knowingly and intentionally converted Plaintiff’s 30% interest in SEF to herself. . . . Defendant never became a member of SEF as Defendant never fulfilled the terms of the Purchase Agreement and closing never occurred. This conversion of Plaintiff’s 30% interest in SEF to Defendant harmed Plaintiff.” (Complaint, ¶¶ 60-61.)

The Court SUSTAINS Dadgostari’s demurrer to the complaint’s third cause of action with 10 days’ leave to amend. To state a breach of contract cause of action, a plaintiff must allege: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) damage to the plaintiff resulting from that breach. (See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 228 (Rutherford).) Dadgostari argues both that the complaint does not allege that Lu fulfilled her obligations under the Purchase Agreement and that the complaint does not sufficiently plead damages. (MPA, p. 7:10-17.)

The Court agrees. Along with incorporating the complaint’s preceding allegations, the complaint recites alleged terms of the Purchase Agreement, alleges that “Defendant breached the Purchase Agreement by failing to pay Plaintiff the full $500,000 purchase price despite multiple demands by Plaintiff,” and alleges that “as a proximate result of Defendant’s breach of the Purchase Agreement, the condition precedent in § 2.4(a) of the Purchase Agreement was never satisfied and closing never occurred.” (Complaint, ¶¶ 63-69.)

These allegations sufficiently state the existence of a valid contract and breach. However, they do not actually allege that Lu suffered damages as a result of any alleged breach of contract— rather, the complaint alleges that a condition precedent and “closing” never occurred. (Id. at ¶ 69.) Nor do they allege that Lu performed her obligations under the Purchase Agreement or was excused from doing so. In opposition, Lu explains that her performance under the Purchase Agreement “never became due” and therefore her “performance [was] excused as a matter of law.” (Opposition, p. 6:12-21.)

But the complaint itself does not actually allege this.

The Court SUSTAINS Dadgostari’s demurrer to the complaint’s fourth cause of action with 10 days’ leave to amend. Dadgostari is technically correct that unjust enrichment “is not a cause of action, however, or even a remedy, but rather a general principle, underlying various legal doctrines and remedies.” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 (McBride), internal citation and quotation marks omitted.) However, the labeling of a cause of action as “unjust enrichment” is not dispositive of whether a cause of action has been stated. (McBride, supra, 123 Cal.App.4th at p. 387.)

A court deciding a demurrer must look to the gravamen of the complaint to determine if any cause of action is stated. (Ibid.) “The nature and character of a pleading is to be determined from the facts alleged, not the name given by the pleader to the cause of action.” (Ananda Church of Self-Realization v. Massachusetts Bay Ins. Co. (2002) 95 Cal.App.4th 1273, 1281, emphasis original, internal citation omitted.)

With this in mind, the Court notes that Lu argues in opposition that the complaint has sufficiently alleged an “inequitable benefit” that the “quasi-contract doctrine is designed to remedy.” (Opposition, p. 7:17-23, internal citation omitted.) As such, Lu appears to contend that the complaint’s fourth cause of action sufficiently pleads an action in quasi-contract. The Court disagrees. An “action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter. However, restitution may be awarded in lieu of breach of contract damages when the parties 16

had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by alleg[ing in that cause of action] that the express contract is void or was rescinded.” (Rutherford, supra, 223 Cal.App.4th at p. 231, internal citations and quotation marks omitted; see also ibid. [“A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement.”], internal citation omitted; Klein v.

Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388-1389 [“A plaintiff may not, however, pursue or recover on a quasi-contract claim if the parties have an enforceable agreement regarding a particular subject matter. . . . Although a plaintiff may plead inconsistent claims that allege both the existence of an enforceable agreement and the absence of an enforceable agreement, that is not what occurred here. Instead, plaintiffs’ breach of contract claim pleaded the existence of an enforceable agreement and their unjust enrichment claim did not deny the existence or enforceability of that agreement.”].)

The complaint’s fourth cause of action does not allege any facts denying the “existence or enforceability” of the Purchase Agreement. (Complaint, ¶¶ 70-77.) Therefore, although the Court does not agree with Dadgostari that it can sustain Dadgostari’s demurrer to the fourth cause of action purely on the basis that an unjust enrichment cause of action does not exist in California, the Court otherwise finds that the complaint’s fourth cause of action is insufficiently pled.

The Court will prepare the final order.

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