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SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 1 of 8
APPEARANCES:
For Plaintiff(s): Jonathan T Nguyen (Telephonic) by James B. Devine
For Defendant(s): Chad Biggins (Telephonic)
NATURE OF PROCEEDINGS: Trial Setting Conference; Hearing on Motion to Compel
Discovery (not "Further Discovery"); Hearing on Demurrer - with Motion to Strike (CCP
430.10)
The matters are called for hearing.
After reading and considering all moving documents, hearing argument, and conferring with
counsel for plaintiff/cross-defendant and defendants/cross-complainants, the court rules as
follows:
The Demurrer - with Motion to Strike (CCP 430.10) filed by LAKESHORE INVESTMENT
LLC., a California limited liability company on 09/07/2021 is Sustained in Part.
The Motion to Strike (not initial pleading) filed by LAKESHORE INVESTMENT LLC., a
California limited liability company on 09/07/2021 is Granted.
The Motion to Compel Discovery (not Further Discovery) - 1 moving party, 1 motion filed by
NOW SOLUTIONS INC., a Delaware Corporation, VERTICAL COMPUTER SYSTEMS, a
Delaware Corporation on 07/22/2021 is Granted.
Demurrer to First Amended Cross-Complaint
The Court posted this tentative order in advance of the hearing. Both parties submitted on the
Court’s tentative. Therefore, the Court adopts its tentative order. Because punitive damages are
not available for a breach of contract claim, the Court grants the motion to strike without leave to
amend. The Court’s clerk shall provide notice.
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 2 of 8
TENTATIVE ORDER
Plaintiff Lakeshore Investment LLC filed this action against Now Solutions, Inc. (“Now
Solutions”) and Vertical Computer Systems (“VCS”) asserting a cause of action for breach of a
written contract. Specifically, Lakeshore alleges that Now Solutions executed a promissory note
in the amount of $1,759,150. Lakeshore alleges that Now Solutions is in default, that that VCS is
liable as a co-debtor and guarantor. On April 20, 2021, Now Solutions and VCS filed a first
amended cross-complaint against Lakeshore and two affiliated individuals (collectively,
“Lakeshore”) asserting the following causes of action: (1) Breach of contract/breach of the
implied convent of good faith and fair dealing, (2) Conversion, (3) Common counts, (4) Fraud,
(5) Negligent misrepresentation, (6) Breach of fiduciary duty, and (7) Business and Professions
Code section 17200. Lakeshore demurred to the cross-complaint, and the Court sustained the
demurrer with leave to amend.
Now Solutions and VCS filed a second amended cross-complaint on August 11, 2021, asserting
the following causes of action:
1. Breach of contract against Lakeshore and Robert Farias
2. Breach of contract against Robert Farias
3. Fraud against all cross-defendants
4. Negligent misrepresentation against all cross-defendants
5. Breach of fiduciary duty against Robert Farrias
6. Conversion against Lakeshore and Robert Farrias
7. Common counts, money had and received, and unjust enrichment against all cross-defendants
8. Unfair competition against all cross-defendants
Lakeshore now demurs to all causes of action in which it is a cross-defendant, specifically, the
first, third, fourth, sixth, seventh, and eighth causes of action. Lakeshore also moves to strike the
prayer for punitive damages and related allegations.
A. Breach of Contract
The elements of a breach of contract are as follows: (1) The existence of a contract; (2) The
plaintiff’s performance or excusable non-performance under the contract; (3) Defendant’s
breach; and (4) Damage to Plaintiff. (State Compensation Ins. Fund v. ReadyLink Healthcare,
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 3 of 8
Inc. (2020) 50 Cal.App.5th 422, 449.) The second amended cross-complaint alleges that
Lakeshore breached the loan agreement at issue by charging compound interest. (Second
Amended Cross-Complaint, ¶¶ 30-34.) The second amended cross-complaint alleges that Now
Solutions and VCS were forced to transfer 25% ownership of Now Solutions as a result of the
invalid demand. (Id., ¶ 35.) This is sufficient to assert a cause of action for breach of contract
against Lakeshore.
Lakeshore cites Civil Code section 1916-2, which provides, “in the computation of interest upon
any . . . agreement, interest shall not be compounded, nor shall the interest thereon be construed
to bear interest unless an agreement to that effect is clearly expressed in writing and signed by
the party to be charged therewith,” does not apply to commercial loan agreements. (Civ. Code, §
1916-2, Wishnev v. The Northwestern Mutual Life Ins. Co. (2019) 8 Cal.5th 199, 219.) That is
immaterial. Defendants allege that the loan agreement specifically provides for interest per
annum. (Second Amended Cross-Complaint, ¶ 32.) The Court cannot resolve the disagreement
between the parties regarding the proper interpretation of the agreement on demurrer.
Lakeshore argues that the statute of limitations for breach of a written contract is four years.
However, the second amended cross-complaint (and the complaint) suggest that the demands for
payment of the interest have continued. Therefore, the Court cannot conclude that the breach of
contract claim necessarily violates the statute of limitations. The demurrer to the first cause of
action is overruled.
B. Fraud
“The elements of fraud, which give rise to the tort action for deceit, are (1) a misrepresentation,
(2) with knowledge of its falsity, (3) with the intent to induce another's reliance on the
misrepresentation, (4) justifiable reliance, and (5) resulting damage.” (Conroy v. Regents of
University of California (2009) 45 Cal.4th 1244, 1255.) Fraud must be plead with particularity.
(Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331.)
The second amended cross-complaint alleges that Robert Farrias and Robert Mokhtarian, acting
on behalf of Lakeshore, stated: (1) Now Solutions and VCS owed excessive amounts of interest,
forbearance fees and attorney’s fees; (2) Lakeshore and the other cross-defendants were
authorized to declare default and foreclose on the collateral, which would have resulted in
financial ruin of the cross-complainants; and (3) if the cross-complainants entered into the
Lakeshore Loan Agreement and various amendments, the cross-defendants would not foreclose
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 4 of 8
on their assets. (Second Amended Cross-Complaint, ¶ 52.) As an initial matter, the crosscomplainants do not allege to whom these alleged misrepresentations were made, when they
were made, or in what context they were made. But the larger problem is that these allegations
do not constitute a fraud claim. “[A] party alleging fraud or deceit in connection with a contract
must establish tortious conduct independent of a breach of the contract itself, that is, violation of
some independent duty arising from tort law.” (Food Safety Net Services v. Eco Safe Systems
USA, Inc. (2012) 209 Cal.App.4th 1118, 1130 (citing Robinson Helicopter Company, Inc. v.
Dana Corporation (2004) 34 Cal.4th 979, 988).) The second amended cross-complaint alleges
that the cross-defendants breached the contract by charging compound rather than simple
interest. This is a contractual issue.
The second amended cross-complaint alleges that Robert Farrias concealed the fact that he had
settled his tax liabilities with the Internal Revenue Service. As discussed previously, this
allegation cannot form the basis of a fraud claim against Lakeshore. The remaining allegations
are insufficient to support fraud claims against Lakeshore. Therefore, the demurrer to the third
cause of action is sustained.
C. Negligent Misrepresentation
The second amended cross-complaint asserts a cause of action for negligent misrepresentation
against Lakeshore. The Court sustains the demurrer to this cause of action for the reasons
discussed above.
D. Conversion
The second amended cross-complaint asserts a cause of action for conversion, alleging that the
cross-defendants converted property “by obtaining said property through means of fraud and
deceit, extortion, duress or other unlawful means.” (Second Amended Cross-Complaint, ¶ 80.)
Defendants do not allege facts to support this conclusion. The Court also sustains the demurrer to
this cause of action for the same reasons discussed above.
E. Common Counts, Money Had and Received, and Unjust Enrichment
The Court overrules the demurrer with respect to Common Counts: Money Had and Received.
The second amended cross-complaint alleges that Lakeshore received payments to which it was
not entitled based upon a miscalculation of interest. (Second Amended Cross-Complaint, ¶ 86.)
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 5 of 8
This is sufficient for pleading purposes. (See Farmers Ins. Exchange v. Zerin (1997) 53 Cal.
App. 4th 445, 460.) However, the second amended cross-complaint also asserts a cause of action
for unjust enrichment. The Court sustains the demurrer to this cause of action, because unjust
enrichment is not a separate cause of action or even an independent remedy. (McBride v.
Boughton (2004) 123 Cal.App.4th 379, 387; see also Jorgani v. Superior Court (2008) 165
Cal.App.4th 901, 911-91.)
F. Unfair Competition
The second amended cross-complaint asserts a cause of action for unfair competition under
Business and Professions Code section 17200 based upon the underlying fraud-related causes of
action. The Court sustains the demurrer to this cause of action for the same reasons discussed
above.
CONCLUSION AND ORDER
At heart, the second amended cross-complaint asserts a claim for breach of contract based upon
the cross-defendants charging compound interest instead of simple interest and making demands
upon that allegedly improper foundation. While the second amended cross-complaint states a
claim for breach of contract, the allegations against Lakeshore do not rise to the level of fraud.
The Court orders as follows:
1. The demurrer to the first cause of action in the second amended cross-complaint—Breach of
Contract against Lakeshore—is overruled.
2. The demurrer to the seventh cause of action, to the extent it asserts a cause of action for
Common Counts: Money Had and Received against Lakeshore, is overruled.
3. The demurrer to the seventh cause of action, to the extent it asserts a cause of action for Unjust
Enrichment against Lakeshore, is sustained.
4. The demurrer to the remaining causes of action against Lakeshore is sustained.
5. The Court declines to afford leave to amend. The cross-complainant has filed three crosscomplaints, to no avail, and the Court previously granted leave to amend. It is clear to the Court
that further amendment would not remedy the defects. This order is without prejudice to the
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 6 of 8
cross-complainants seeking leave to amend if they develop sufficient evidence during discovery
in order to do so.
6. The Court’s clerk shall provide notice.
Motion to Compel
Plaintiff Lakeshore Investment LLC (“Lakeshore”) filed this action against Now Solutions, Inc.
(“Now Solutions”) and Vertical Computer Systems (“VCS”) asserting a cause of action for
breach of a written contract. Specifically, Lakeshore alleges that Now Solutions executed a
promissory note in the amount of $1,759,150. Lakeshore alleges that Now Solutions is in default,
that that VCS is liable as a co-debtor and guarantor. On April 20, 2021, Now Solutions and VCS
filed a first amended cross-complaint against Lakeshore and two affiliated individuals
(collectively, “Lakeshore”) asserting the following causes of action: (1) Breach of
contract/breach of the implied convent of good faith and fair dealing, (2) Conversion, (3)
Common counts, (4) Fraud, (5) Negligent misrepresentation, (6) Breach of fiduciary duty, and
(7) Business and Professions Code section 17200. Now Solutions and VCS now move to compel
Lakeshore to produce its person most knowledgeable (“PMK”) to testify at a deposition
regarding specific topics. Lakeshore opposes the motion.
Per Code of Civil Procedure section 2025.450, if a party to the action fails to appear for
deposition after service of a deposition notice and the party has not served a valid objection to
that deposition notice, the party that noticed the deposition may move for an order to compel the
deponent to attend and testify at deposition and to produce the categories of documents set forth
in the deposition notice. (Code Civ. Proc., §2025.450, subd. (a).) In this case, the moving parties
served Lakeshore with a deposition notice on May 21, 2021. Lakeshore refused to produce a
PMK for a deposition, arguing that discovery is closed because the original trial date was
September 8, 2020. Lakeshore is incorrect. Per the Presiding Judge’s administrative orders
during the pandemic, all pre-trial dates were continued along with the trial date, absent an order
from the trial court to the contrary.
Lakeshore argues that the deposition notice seeks personal and employment records, and that the
moving parties did not comply with the notice requirements of Code of Civil Procedure sections
1985.3 and 1985.6. Similarly, Lakeshore argues that the moving parties seek private information.
If Lakeshore sought to narrow the scope of the deposition notice, it was required to file a motion
for a protective order or a motion to quash the deposition notice. (Code Civ. Proc. § 2025.420.)
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 7 of 8
An objection is not sufficient. (Code Civ. Proc. § 2025.410(a).) Regardless, the Court does not
agree that the requested documents implicate these privacy concerns. Lakeshore filed this action
for breach of a written contract concerning a promissory note. Now Solutions and VCS are
entitled to the documents they seek, which relate to the transactions at issue. To the extent
Lakeshore complains about its own documents being produced, Lakeshore waived any such
privacy considerations by filing this action. (See Britt v. Superior Court (1978) 20 Cal.3d 844,
855-856.) Plaintiffs waive their right to privacy by pursuing litigation that puts the subject at
issue. (Id., pp. 863-864.)
Similarly, Lakeshore argues that Defendants have not shown good cause for the documents at
issue. The relevance seems apparent, but Defendants have set forth the basis for each request.
(See Declaration of Chad Biggins, ¶ 7.) Defendants have met their burden to show that the
documents pertain to their trial preparation. (See Associated Brewers Dist. Co., Inc. v. Superior
Court (1967) 65 Cal.2d 583, 587.)
Lakeshore argues that it already made Robert Farrias available for a PMK deposition when
counsel for Now Solution and VCS noticed his deposition as an individual. (See Declaration of
Jonathan Nguyen, Exh. A, p.1.) This was not proper and does not preclude the moving parties
from proceeding with this motion. The Court also finds that this constitutes an abuse of the
discovery process, supporting the Court’s decision to award sanctions in connection with this
motion.
Based upon the foregoing, the moving parties’ motion to compel is granted. The moving parties
also seek sanctions in the amount of $3,980 against Lakeshore and its counsel-of-record,
Jonathan Nguyen. The Court finds that the refusal to make the PMK available for a deposition
constitutes an abuse of discovery that warrants monetary sanctions. The Court orders Lakeshore
and its counsel-of-record, Jonathan Nguyen, Esq., to pay sanctions in the amount of $2,461.65
based upon six hours at a reasonable billing rate of $400 per hour plus a filing fee of $61.65.
CONCLUSION AND ORDER
The Court orders as follows:
1. The motion to compel the deposition of Lakeshore’s PMK is granted. The deposition shall
occur within thirty (30) days unless the parties stipulate to a different deadline.
SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
Civil Division
Central District, Stanley Mosk Courthouse, Department 39
19STCV15381 October 15, 2021
LAKESHORE INVESTMENT LLC., A CALIFORNIA
LIMITED LIABILITY COMPANY vs NOW SOLUTIONS
INC., A DELAWARE CORPORATION, et al.
9:00 AM
Judge: Honorable Stephen I. Goorvitch CSR: None
Judicial Assistant: R. Mendoza ERM: None
Courtroom Assistant: K. Ghazarian Deputy Sheriff: None
Minute Order Page 8 of 8
2. Lakeshore and its counsel-of-record, Jonathan Nguyen, jointly and severally, shall pay
sanctions in the amount of $2,461.65 within thirty (30) days unless the parties s
