Broken Drum Bar, Inc. v. Site Centers Corp.

• Court: District Court, C.D. California
• Decided: October 10, 2019
• Docket: 2:19-cv-01445
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 Anited States District Court 9 Central District of California 10 11 | BROKEN DRUM BAR, INC., Case No. 2:19-cv-01445-ODW (SKx) 12 Plaintiff, B Vv. ORDER GRANTING, IN PART, DENYING IN PART, DEFENDANTS’ 14 || SITE CENTERS CORP. et al., MOTION TO DISMISS [44] 15 Defendants. 16 17 18 I. INTRODUCTION 19 Plaintiff Broken Drum Bar, Inc. (“Broken Drum Bar’) brings several claims 20 || against Defendants Site Centers Corp. Inc. (“Site Centers”) and DDR Urban LP 21] (“DDR”) involving a lease dispute. Defendant DDR owns and operates a shopping 22 || center in Long Beach, California. (See Second Am. Compl. (“SAC”) 9§ 10, 11, 13, 23 || ECF No. 37.) 24 Defendants move to dismiss on the following grounds: (1) Defendant Site 25 || Centers is an improper defendant; and (2) Plaintiff fails to sufficiently allege breach of 26 || covenant of good faith and fair dealing, intentional misrepresentation, and negligent 27 28

1 || interference with prospective economic relations. (See generally Mot. to Dismiss 2 || SAC (““Mot.”), ECF No. 44-1.)! 3 For the reasons that follow, the Court GRANTS, IN PART and DENIES, IN 4 || PART, Defendants’ Motion to Dismiss. 5 II. BACKGROUND 6 Stefan Guillen is the President of Plaintiff Broken Drum Bar, Inc. (Mot. 2-3.) Brian Maginnis is an investor of Broken Drum Bar. (SAC 4 95.) Defendant DDR 8 | owns and operates the Pike Outlets in Long Beach, California. (Mot. 1.) Defendant 9 || Site Centers and Defendant DDR are allegedly agents and employees of each another. 10 || (See SAC J 8.) 11 In 2017, Guillen, on behalf of Broken Drum Bar, commenced the process of 12 | obtaining a lease for unit number 550 (“Lease”) listed as “Long Beach Restaurant 13 | with 2am Liquor and Entertainment” (previously occupied by Sargent Pepper’s 14 || Dueling Pianos (“Sgt. Pepper’s”)). (See SAC 4 13, 15, 22.) In July 2017, Guillen 15 || visited unit number 550 and the tenant next door to review the space and listen to the 16 || music during hours of operations. (SAC {[§[ 16, 17.) He also attempted to meet with 17 || the owners of Sgt Pepper’s, but the listing statement advised against disturbing current 18 || tenants. (SAC 419.) Accordingly, Guillen was prohibited from communicating with 19 | Sgt. Pepper’s staff. (SAC 4 19.) 20 In August 2017, Guillen and Maginnis, met Patrick Brady, the Vice President of 21 || Leasing for Defendant DDR, in the office of Morgan Erickson, Regional Property 22 || Manager for Defendant Site Centers. (SAC § 22.) Guillen presented Patrick Brady a 23 || detailed outline of his business plan, which indicated that Broken Drum Bar, like Sgt. 24 || Pepper’s, intended to use the space as a live music and entertainment venue. 25 || (SAC 9916, 20,23.) During the Lease negotiations, Brady allegedly pressured 26 | Guillen to sign the Lease without any rent abatement in exchange for $90,000.00 in 27 28 || | Having carefully considered the papers filed in connection to the instant Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15.

1 || tenant improvements. (SAC 26, 27.) The two discussed potential improvements, 2|| but allegedly at no time did the parties discuss mitigating noise complaints. 3 || (SAC § 27.) In September 2017, Brady informed Broken Drum Bar that Guillen’s proposal had been recommended for approval and that “final approval and consent 5 || [for] use as a live music and bar .. . would take a few more weeks.” (SAC { 32.) 6 On March 1, 2018, Broken Drum Bar took over the lease of unit number 550 7|| from Set. Pepper’s. (SAC § 34.) On March 17, 2018, Broken Drum Bar held a soft 8 | opening. (SAC 435.) During the soft opening, security guards positioned themselves 9 || in front of Broken Drum Bar due to noise complaints. (SAC 4 35.) Throughout 10 || Broken Drum Bar’s operation of the business, Defendants allegedly placed security 11 || personnel at the entrance of Broken Drum Bar, and the security personnel were 12 || instructed to take notes of employee names and patrons entering the business. (SAC 4 13 | 38.) 14 Broken Drum Bar alleges that Defendants never informed it of prior noise 15 | complaints against unit number 550. (SAC □□ 36.) Broken Drum Bar further alleges 16 || that Erickson, regional manager for Site Centers, falsely stated that there had been no 17 || noise complaints relating to unit number 550 prior to Broken Drum Bar’s tenancy. 18 | (SAC 4 39.) However, Broken Drum Bar alleges that on May 23, 2018 the manager 19 || of Cinemark, a tenant in the shopping center, informed Broken Drum Bar that the 20 || noise complaints from unit number 550 were nothing new and had been an issue with 21 || the prior tenants, Sgt. Peppers. (SAC 4 37.) Defendants demanded that Broken Drum 22 || Bar remedy the noise issue or change the nature of their business. (SAC 4 41.) In 23 || response, Broken Drum Bar informed Defendants that they would withhold rent until 24 || Defendants fixed the property. (SAC 4 45.) However, shortly thereafter, Broken 25 || Drum Bar ceased operation. (SAC 4 46.) 26 On January 7, 2019, Plaintiff Broken Drum Bar filed this lawsuit in Los 27 || Angeles County Superior Court. (Notice of Removal, ECF No. 1.) On February 27, 28 || 2019, Defendants removed this case on the basis of diversity jurisdiction. (Notice of

1 || Removal.) On June 5, 2019, Plaintiff filed its Second Amended Complaint alleging 2 || six claims for relief: (1) negligence; (2) breach of implied covenant of good faith and 3 || fair dealing; (3) intentional misrepresentation; (4) negligent misrepresentation; (5) 4|| negligent interference with prospective economic relations; and (6) breach of quiet 5 || enjoyment. (See generally SAC.) On June 20, 2019, Defendants filed a motion to 6 || dismiss. (See Mot.) 7 HII. LEGAL STANDARD 8 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 9 || legal theory or insufficient facts pleaded to support an otherwise cognizable legal 10 || theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 11 || survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 12 | requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 13 || Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 14 || raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 15 |} U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual matter, 16 || accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 17 || Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). 18 The determination of whether a complaint satisfies the plausibility standard is a 19 || “context-specific task that requires the reviewing court to draw on its judicial 20 || experience and common sense.” /d. at 679. A court is generally limited to the 21 || pleadings and must construe all “factual allegations set forth in the complaint... as 22 || true and... in the light most favorable” to the plaintiff. Lee v. City of Los Angeles, 23 | 250 F.3d 668, 679 (9th Cir. 2001). But a court need not blindly accept conclusory 24 || allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. 25 || Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 26 Where a district court grants a motion to dismiss, it should generally provide 27 || leave to amend unless it is clear the complaint could not be saved by any amendment. 28

1 || See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 2} 1025, 1031 (9th Cir. 2008). 3 IV. DISCUSSION 4] A. Defendants Site Centers and DDR Urban 5 Defendants argue that Site Centers is not a proper party to the lawsuit and 6 | should be dismissed. Plaintiff asserts that Site Centers is liable under an agency theory. (Opp’n to Mot. (“Opp’n”) 13, ECF No. 45.) “Generally, for an agency 8 || relationship to exist, a principal must consent to the agent acting on his behalf and ? subject to his control, and the agent must consent to act for the principal.” Holley v. Crank, 400 F.3d 667, 673 (9th Cir. 2005). Here, Plaintiff alleges that Defendant Site Centers, as a parent organization, "2 took over performance of the day-to-day operations of DDR, a subsidiary, by ° handling every aspect of the Lease negotiations and employing DDR’s staff. (Opp’n 12-13.) “[I]f a parent corporation exercises such a degree of control over its

6 subsidiary corporation that the subsidiary can legitimately be described as only a 17 | means through which the parent acts, or nothing more than an incorporated 18 department of the parent, the subsidiary will be deemed to be the agent of the 19 | Parent ....” Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 541, 29 | (Cal. App. 2000) (stating examples of control to include interlocking directors and 91 || officers, consolidated reporting, shared professional services, and degree of direction 22 || and oversight expected from the status of ownership). Although Plaintiff asserts that 23 || several employees worked in different capacities for both Defendants, Plaintiff fails 24 || to allege that Site Centers exercised overwhelming control over DDR’s operation.” 25 26 7 ? Brady was the Vice President of Leasing for Defendant DDR and worked for Defendant Site Centers in Arizona. (Opp’n 13.) Erickson managed the Long Beach property in issue but was 28 || employed by Defendant Site Centers. (SAC § 22.) Bryan Zabell, the DDR Urban signatory on the Lease, was a General Partner of DDR Urban Corp., Site Centers’ predecessor. (SAC § 10.)

] Thus, the Court does not find an agency relationship between the two Defendants. Even after granting Plaintiff leave to amend to sufficiently allege an 3 | agency relationship, Plaintiff still fails to plead claims, and thus, the Court dismisses 41 all claims against Defendant Site Centers without leave to amend. 5 Accordingly, the Court GRANTS Defendants’ Motion as to this claim without © | leave to amend. 7! B. Specific Claims 8 1. Breach of Covenant of Good Faith and Fair Dealing ? Plaintiff alleges that Defendants breached this implied covenant on three basis: 10 (1) placing security guards who harassed patrons and employees outside Broken Drum 11} Bar, thereby interfering with Plaintiff's right to operate its premises; (2) refusing to 12 financially contribute to remedy the noise bleeds; and (3) withholding known 13 | information of structural defect prior to entering the Lease. (SAC 36, □□□□□□ 14 Opp’n 15.) Defendants move to dismiss on all basis. (Mot. 6-7.) 15 Plaintiff fails to oppose Defendants’ motion as to the first ground and abandons 16 ll its second argument in its opposition, stating “[t]he breach of this covenant comes not 171 from Defendants refusal to pay for the noise insulation, but from the withholding of 18 | known information of structural defect .. ..” (Opp’n 14.) Consequently, the Court 19 | grants Defendants’ motion on Plaintiff's first and second grounds. See Heraldez v. 20 1 Bayview Loan Servicing, LLC, No. CV 16-1978-R, 2016 WL 10834101, at *2 (C.D. 21! Cal. Dec. 12, 2016) aff'd, 719 F. App’x 663 (9th Cir. 2018) (citing Stichting 22 Pensioenfonds ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1132 (C.D. Cal. 23 | 2011)) (“Failure to oppose constitutes a waiver or abandonment of the issue.”)). 24 Furthermore, Defendants refute the third basis asserting that the covenant does 25 not apply to conduct prior to the existence of an agreement. (Reply to Opp’n 26 (“Reply”) 2, ECF No. 46.) The “implied covenant is a supplement to an existing 27! contract, and thus it does not require parties to negotiate in good faith prior to any 28 agreement.” McClain v. Octagon Plaza, LLC, 159 Cal.App.4th 784, 799 (Ct. App.

1 | 2008). Thus, “allegations prior to the existence of a contract cannot form the basis for a claim for breach of the covenant of good faith and fair dealing.” Jd. (holding that 3 || plaintiff fails to state a claim for breach of covenant of good faith and fair dealing 4|| where plaintiff bases his claim on defendant’s representations that induced plaintiff to 5 || enter into the contract.) Since parties are not required to negotiate in good faith prior 6 || to any agreement, Plaintiff fails to state a claim based on this allegation. 7 Since it is clear based on the facts and circumstances that Plaintiff's claim for 8 | breach of implied covenant can not be saved by any amendment, the Court dismisses 9 || this claim without leave to amend. 10 Accordingly, the Court GRANTS the Motion as to this claim without leave to 11 | amend. 12 2. Intentional Misrepresentation 13 Defendants move to dismiss Plaintiff's claim for intentional misrepresentation 14 | because Plaintiff fails to allege an affirmative misrepresentation or active concealment 15 || of fact. (Mot. 7-8.) For an intentional misrepresentation claim, Plaintiff must allege: 16 || “(a) misrepresentation (false representation, concealment or nondisclosure); (b) 17 || knowledge of falsity (or ‘scienter’); (c) intent to defraud, 1.e., to induce reliance; (d) 18 || justifiable reliance; and (e) resulting damage.” Schaefer v. Robbins & Keehn, LLP, 19 | No. 06-cv-821-H (BLM), 2007 WL 935543, at *4 (S.D. Cal. Mar. 7, 2007) (citing 20 || Agosta v. Astor, 120 Cal. App. 4th 596, 603 (Ct. App. 2004)). Active concealment 21 || occurs when a defendant prevents the discovery of material facts. Rubenstein v. The 22 || Gap, Inc., 14 Cal. App. 5th 870, 878 (Ct. App. 2017). 23 Plaintiff alleges that Defendants actively concealed prior noise complaints, 24 | knowing that Plaintiff's business plan included entertainment and live music likely to 25 || receive similar noise complaints. (SAC 4] 68, 69.) As Defendants assert, Plaintiff 26 || could have conducted due diligence to assess whether such complaints were made 27 || before; however, Plaintiff asserts that Defendants prevented it from discovering this 28 || material fact as Defendants told Plaintiff not to disturb current tenants. (Reply 4; SAC

1 || § 19.) Furthermore, Plaintiff alleges that Defendants’ failure to disclose information led Plaintiff to enter into the Lease and suffer damages. (SAC {Jf 72, 75.) At this 3 || stage, Plaintiff has sufficiently alleged that Defendants knowingly failed to provide 4] Plaintiff with material information and that Plaintiffs reliance on Defendants’ 5 || concealment is the cause of Plaintiffs harm.*> (SAC 4 19, 68-75.) 6 Accordingly, the Court DENIES Defendants’ Motion to Dismiss as to the claim 7 || for intentional misrepresentation. 8 3. Negligent Interference with Prospective Relations 9 Defendants move to dismiss Plaintiff's claim for negligent interference with 10 || prospective economic relations on the basis that Plaintiff fails to allege the disruption 11 || of an economic relationship with a reasonably probable future benefit. (Mot. 9-10.) 12 | Defendants argue that Plaintiff failed to allege that the relationship between Guillen 13 | and Maginnis contained a reasonably probable future economic benefit, that 14 || Defendants’ failure to act with due care would interfere with this relationship; and 15 || how the relationship was interfered with or disrupted. (Mot. 9-10.) 16 To state a claim for negligent interference with prospective economic relations, 17 || a plaintiff must allege: 18 (1) an economic relationship existed between the plaintiff and a third 19 party which contained a reasonably probable future economic benefit 5 or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did 21 not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant 23 was negligent; and (4) such negligence caused damage to plaintiff in 24 that the relationship was actually interfered with or disrupted and 35 plaintiff lost in whole or in part. 26 27 28 || > The Court also denies Defendants’ request to dismiss Plaintiffs punitive damages claim. (Mot. 7-8.)

1 Venhaus v. Shultz, 155 Cal. App. 4th 1072, 1077-78 (Ct. App. 2007). Plaintiff 2|| alleges that Defendants were aware that Maginnis was an investor in Broken Drum 3 | Bar and a potential source of additional capital for Plaintiff and its ongoing operations. (SAC § 95.) Furthermore, Plaintiff claims that Defendants’ representation that 5 | Plaintiff could operate a live music and entertainment business in unit number 550 6 || interfered with the relationship between Guillen and Maginnis. (SAC 9 97, 101.) As 7 || a result, Maginnis refused to provide additional line of credit to remedy the noise 8 | defect and ceased funding the operating costs of Plaintiff's business. 9 || (SAC 49 97, 101.) Thus, Plaintiff has sufficiently plead the issues Defendants raise in 10 || their Motion. 11 Accordingly, the Court DENIES Defendants’ Motion as to this claim. 12 IV. CONCLUSION 13 For the foregoing reasons, the Court GRANTS IN PART and DENIES IN 14 || PART, Defendants’ Motion. Specifically, the Court GRANTS Defendants’ Motion as 15 || to Plaintiff's Breach of Covenant of Good Faith and Fair Dealing claim and all claims 16 || against Defendant Site Centers, and DENIES Defendants’ Motion as to all other 17 | claims. Accordingly, all other claims will proceed. 18 19 IT IS SO ORDERED. 20 21 October 10, 2019 22 Led ial 4 OTIS D. HT, II 05 UNITED STATES DISTRICT JUDGE

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